Gas distribution license now valid for 25 years, as NMDPRA unveils 6 more gazetted regulations

Oredola Adeola

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced the receipt of another set of newly gazetted regulations, including Gas Distribution Systems Regulations which establish the procedure for the grant of a gas distribution licence for players in a local distribution zone, as well as 25 years validity period for licence holders.

Mr Farouk Umar, Authority Chief Executive NMDPRA, received the six newly gazette regulations from the Chairman of the Regulation Drafting Committee on Wednesday.

EnergyDay gathered that the six new regulations, which brings the number of gazetted regulations published so far by the Authority to twelve(12) are specifically dedicated to boosting investment and fostering expansion in the Nigeria’s midstream and downstream sectors through regulatory clarity, fairness, transparency, and industry best practices.

The regulations are; National Strategic Stock; Midstream Gas Flare; Midstream & Downstream Alternate Dispute Resolution; Midstream & Downstream Penalties & Enforcement Mechanism; Gas Trading & Settlement and Gas Distribution Systems Regulations.

The NMDPRA Chief in his remark implored all stakeholders in the sector to familiarize themselves with the regulations and implement accordingly.

EnergyDay’s check showed that the Authority had in March unveiled six regulations consisting of; the Midstream and Downstream Petroleum Operations Regulations and Assignment or Transfer of License and Permit Regulations.

Others are the Petroleum Measurement Regulations; Gas Pricing and Domestic Demand Regulations; Petroleum (Transportation and Shipment) Regulations; and Natural Gas Pipeline Tariff Regulations.

The regulations are coming based on the provisions of the Petroleum Industry Act (PIA) establishing a framework for the development of the relevant regulations that would support sustainable growth and investment across the oil and gas value chain in Nigeria.

The NMDPRA had in the past organised different consultative meetings with relevant stakeholders including all the major players in the downstream and midstream sector to review the regulations designed to create an enabling environment for oil and gas businesses.

Apart from the 12 gazetted regulations and eight other regulations are still being considered by the Authority and the Ministry of Justice.

EnergyDay in a review of the six new regulations showed that the Gas Distribution Systems Regulations apply to activities connected with the grant of gas distribution licence for a gas distribution system within a local distribution zone, including gas distribution systems in existence prior to the commencement of these Regulations.

By virtue of the regulations, the Authority is empowered to sanction, penalise and impose administrative fines on defaulters. The provision of the regulation also stipulates licence validity term of 25 years from the date of grant of the licence, which may be renewed for further terms of 25 years each, subject to terms and conditions as may be prescribed by the Authority.

On the Midstream Gas flare regulation, part of the new rules is that operators in the midstream shall provide data relating to flare gas, facility maintenance management, and operations in the format required, within Thirty (30) calendar days of the date of the request.

The objectives of those regulations are to reduce the environmental and social impact caused by excessive flaring and venting of flare gas; protect the environment; prevent waste of natural resources; and set criteria for gas flaring in midstream petroleum operations for safety purposes, and include emergency shutdown with depressurization.

On the Flare Gas Penalty, the regulations required that a licensee shall be liable to pay a gas flare penalty of US$0.50 (Fifty United States Cents) per 28.317 standard cubic metres (One thousand standard cubic feet) of gas flared beyond the limit set by the Authority by not more than one million standard cubic feet (1MMSCFD).

It also stated that a licensee shall be liable to pay a gas flare penalty of US$1.00 (One United States Dollar) per 28.317 standard cubic metres (One thousand standard cubic feet) of gas flared beyond the limit set by the Authority greater than One Million standard cubic feet to Ten Million standard cubic feet (>1-10MMSCFD).

The third rule is that a licensee shall be liable to pay a gas flare penalty of US$1.50 (One Dollar, Fifty United States Cents) per 28.317 standard cubic metres (One thousand standard cubic feet) of gas flared beyond the limit set by the Authority by greater than Ten Million standard cubic feet (>10MMSCFD).

The regulation, therefore, required all midstream gas flare penalties collected shall be for the account of the Midstream and Downstream Gas Infrastructure Fund and shall be utilised for midstream and downstream gas infrastructure investment within the Host Community of a designated facility.

On National Strategic Stocks Regulations, the regulations recommended the establishment of national strategic stocks to maintain the security of the supply of petroleum products through the storage and distribution of petroleum products by these Regulations and guidelines issued by the Authority.

The guideline provided that the Authority must issue Guidelines for Designating a National Strategic Stock and give Licensee the right to maintain operating and dead stock.

The Authority shall, by the provision of the regulations, establish and maintain a minimum of 60 days national demand reserve of approved petroleum products as national strategic stocks. The Authority is expected to commence incremental stocking to meet the security of supply.

The guideline also recommended a national strategic stock levy of not more than five percent (5%) of the retail price chargeable on every petroleum product sold in Nigeria by the Authority, for the purpose of administering and financing the national strategic stocks.

This levy is expected to be deducted by the Authority on a wholesale basis.