.

The Key Institutions in Nigerian Oil and Gas Sector

For every sector of the economy, we have institutions that are responsible for running the affairs
of the established agencies. Thus, the institutions go a long way in determining how the sector is
governed or the interplay in a given sector. The oil and Gas sector is a very important sector of
the Nigerian economy. Over 85% of our foreign exchange earnings come from oil and gas and
that is why the sector needs regulations and institutions that one way or the other are mentioned
at some point in relation to the activities in the oil and gas sector. The role of these institutions
are paramount.

In a bid to maximize the benefits of Oil and gas and to mitigate the resource curse, the
government set up a variety of institutions to regulate the activities of this industry. The Nigerian
National Petroleum Corporation (NNPC) and Nigeria Extractive Industries Transparency
Initiative (NEITI)are examples of such institutions.

These institutions are fundamental to this sector or industry. They are responsible for running the
affairs of these agencies. They determine the interplay in a given sector and contribute efforts to
the success of the Oil and Gas industry, which in turn is a major contributor to our economy.
These institutions are paramount as they carry out different roles.

The Nigeria Mineral and Mining Act 2007 vests all minerals on the government through the
Federal Ministry of Solid Minerals Development. The PIA 2021 repealed the NNPC and
replaced it with a commercial legal entity called NNPC Ltd. This Act also removed and replaced
the Department of Petroleum Resources (DPR), with the Upstream Petroleum Regulatory
Commission. The latter is saddled with the responsibility of regulating the Upstream Petroleum
sector and the Nigerian Midstream and Downstream Petroleum Regulatory Authority was also
set up to regulate the downstream and midstream sectors

The ownership and control of oil in Nigeria is vested in the Federal Government by virtue of
section 44 (3) of the Constitution of the Federal Republic of Nigeria and Section 1(1) of PIA.
Although there is no private ownership of oil, the government licenses individuals with the right
to prospect, explore, and mine for oil. The control of the oil industry is exercised by Nigeria’s
government through its regulatory institutions such as

1. The Ministry of Petroleum Resources ( or ‘The Ministry’)

This ministry exercises supervisory and oversight functions in the petroleum sector, it is
responsible for formulating, implementing, and coordinating government policies on the oil and
gas industry.

It has overall regulatory oversight of the industry including the oil refinery sector. The Ministry
is also saddled with the responsibility of advising the government on its policy. One of the
primary challenges encountered by this body in performing these responsibilities is its conflict
and Overlapping functions with the Nigerian National Petroleum Corporation over the
management of the industry.
 This institution is headed by a minister and his roles and functions include;
● He is responsible for the policy direction of the oil and gas sector. Examples of
these include Nigerian Petroleum Policy 2017 and National Gas Policy 2018
made by the ministry
● He performs a supervisory role and is generally involved in everything
concerning the ministry.
● He is responsible for representing the countries on matters of oil and gas
agreements, negotiations of matters on treaties for example at OPEC or at African
petroleum organizations etc.

The Minister who acts upon the recommendation of the commissioner in the upstream sector
grants some acquired rights in this sector. For example, the petroleum exploration license in
terms of assignment and location of this license is by the minister. He can suspend licenses in the
sector if he sees that the activities will affect the environment or the operator is not carrying out
functions in tandem with the PIA. He also has the power to determine the amount of crude oil to
be provided in the country working with OPEC. He has what is known as preemptive rights in
marketing of petroleum products during periods of emergencies, in times of war, civil unrest, and
global pandemics; he can make some directives on how the sector is to operate as provided for
by section 3(3) of the PIA.

The minister also delegates his powers to the chief executive commission of the commission.
The minister can suspend the license on the industry if he perceives that such may have adverse
consequences to the environment especially where the company who had the license was not in
conformity with the laws.

It should however be noted that, unlike in the past where the minister was so powerful, his
powers have now been whittled down a bit as we now have independent regulators for the sector.

2. The Nigerian Upstream Petroleum Regulatory Commission

The Nigerian Upstream Petroleum Regulatory Commission (The Commission; NUPRC), is
established by Section 4(1) of the Petroleum Industry Act (PIA) as a body corporate to perpetual
succession and having a common seal.

It can sue and be sued in its own name. Before its Creation by the PIA, we had a law called the
NNPC. The Federal Government established the Department of Petroleum Resources as a
department saddled with the responsibility of regulating the general Oil and Gas sector;
upstream, midstream, and downstream. It even carries out functions such as pricing.
The Commission is statutorily responsible for both the technical, and commercial regulation of
Upstream Petroleum Operation and administration. Sections 5, 6 and 7 of PIA 2021 provide for
the statutory functions of the commission to include the following;

● To regulate the upstream operations including technical operations and commercial

activities.
● NUPRC ensures compliance with all applicable laws and regulations governing Upstream
Petroleum Operations. It is to ensure that Upstream Petroleum Operations are carried out
in a manner that will minimize waste and achieve optimal government revenues.
● It is to promote healthy, safe, efficient and effective conduct of the Upstream Petroleum
Operations in an environmentally acceptable and sustainable manner.
● To implement the Federal Government’s policies for the Upstream Petroleum Operations
as directed by the Minister of Petroleum under the provisions of the PIA etc.

The technical regulatory functions of the Commission by Section 7 of the PIA includes:
● To enforce, administer, and implement laws, regulations, and policies relating to
Upstream Petroleum Operations.
● To ensure compliance with the applicable national and international petroleum
industry, policies, standards and practices for Upstream Petroleum Operations.
● To observe, monitor, regulate and enforce health, safety and environmental
measures and standards relating to the Upstream Petroleum Operations
management of petroleum reserves and installations.
● To administer, monitor and enforce compliance with the terms and conditions of
the lease and licenses granted; permits and authorizations issued to companies in
respect of Upstream Petroleum Operations.

3. The Nigerian National Petroleum Company Ltd

Formerly known as the Nigerian National. Petroleum Corporation (NNPC) which was
established under the repealed Nigerian National Petroleum Corporation (NNPC) Act. The
Corporation has been repealed and replaced with NNPC Ltd: However, during its existence, it
was the parastatal or agency of the Ministry of Petroleum and Energy resources. It undertook
commercial ventures in the petroleum industry on behalf of the Federal Government, being a
national oil company. The repealed NNPC Act provides that the Corporation has the following
functions:

● Exploring and prospecting for working, winning or otherwise acquiring, possessing, and
disposing of petroleum.
● Purchasing and marketing of petroleum, its products, and by-products.
● Providing and operating pipelines, tankers-ships, etc for the carriage of crude oil, natural
gas, and their products.
4. Federal Inland Revenue Service (FIRS)

The FIRS is responsible for tax collection of oil companies' income tax, hydro-carbon tax, and
petroleum taxes connected to the oil and gas sector.

5. Nigeria Extractive Industries Transparency Initiative (NEITI)

The Oil and Gas sector is a part of the extraction industry and NEITI plays a lead role in the
sector. NEITI was established by the NEITI Act 2007. NETI was established by the government
as a body for transparency. It came into being to promote transparency in the oil and gas sector
and comply with international standards. It carries out audits and can require companies to
disclose their earnings and expenditures to the government. It works to close loopholes in the Oil
and Gas sector.

6. Niger Delta Development Commission (NDDC)

The NDDC was established in 2000. Its essence is to promote development in the Niger Delta
region. Companies are required to pay 3% of their annual budget into the NDDC fund as an
NDDC Levy. It is expected to promote the development of the Niger Delta region, promote
ecological development, and ensure it is not polluted. The Commission is essentially for the
Niger Delta to promote infrastructure.

7. National Oil Spill Detection and Response Agency (NOSDRA)

The Agency was established by the National Oil Spill Detection and Response Act 2006. It is in
charge of oil spill regulation, management, control, and detection. It is also responsible for
reporting all crises that might emanate from spillages in the country.

8. Nigerian Content Development and Monitoring Board

This Board was established in 2010. It is to promote Nigerian content, that is, local participation
in the sector through training, and local capacity, i.e. to reduce bringing in foreigners when
Nigeria can do the job.

Section 104 of the Nigerian Oil and Gas Industry Content Development Act requires that a
certain sum should be paid to the Local Content Development Levy.

9. Nigerian Maritime and Safety Administration Agency

The Agency is not directly in the Oil and Gas sector, however, where there are intersections
between the Oil and Gas sector and maritime, for example in cases of illegal bunkering, and
theft, this agency will be involved in the procedure in one way or another.

10. National Environmental Standards and Regulations Enforcement Agency

Though the Act that establishes this Agency says that it is not an Oil and Gas agency, it is still
established for general environmental protection. It repeals the Federal Environmental Protection
Act. It carries out vital functions excluding the Oil and Gas sector. There are, however, some
linkages to the Oil and Gas sector, for example, it regulates the electricity sector and electricity
may rely on Oil and Gas.