How regulators are hurting Nigeria’s oil sector

While Saudi Arabia spends less than $10 to produce a barrel of crude oil, Nigeria spends close to $30 according to industry experts, and operators say a the multiplicity of regulators giving often contradictory and confusing regulation is a major factor.

Operators in Nigeria’s oil and gas sector answer to at least 36 regulators with overlapping functions making the sector the most regulated and deliver less value than it has the capacity.

The Department of Petroleum Resources (DPR), the Federal Ministry of Environment (FME), National Oil Spill Detection and Response Agency (NOSDRA), Nigerian Maritime Administration and Safety Agency, (NIMASA), Nigerian Nuclear Regulatory Authority (NNRA), Niger Delta Development Commission (NDDC) and Nigerian Electricity Regulatory Commission spew regulations that question the understanding of their purpose.

Other federal regulatory agencies including ministries of health, power, science and technology, Nigerian Local Content Board Inland waterways and port authorities and at least a third of Nigeria’s 36 state governments.

The impact of this distorted system is that it is increasing the cost of production of operators, creating ambiguity, affecting project timelines, stifling investments and fostering inefficiency and poor utilisation of manpower.

“These agencies often issue directives outside agencies setting them up, prescribe offenses and penalties that are not in the act setting them up and even refuse approvals granted by another agency over the same project,” Carol Antaih, general manager Safety, Health & Environment, ExxonMobil Nigeria said in her presentation at the 17th International HSE Biennial Convention held at Eko Hotel and Suites, Lagos on November 29.

She further said regulation in the sector is revenue driven that is why different agencies require different Environmental Impact Assessment (EIAs) for the same project using their own format and paying their own fees.

Worse still operators say that the operators depend on them to fund their monitoring activities creating room for corruption and abuse of regulation.

But these challenges are not unknown to the regulatory bodies, law makers and members of the academia present at the forum as one presentation after another highlighted the consequences of these skewed system.

“The regulators are ill-equipped and dependent on regulators and approve projects based solely on economic consideration rather than impact of on the environment,” admitted Sibeudu Onyebuchi, deputy director, health, safety and environment (HSE) division of DPR.

However, policy makers and administrators in Nigeria, it seems, assume that talking about problems without following it up with concrete actions to solve them is the best use of their abilities as tomes of research and studies on the problem lie fallow.

Antiah called on lawmakers to amend obsolete laws where new laws have been made, merge regulatory agencies and include people knowledgeable about the industry in policy formulation.

The opening session of the conference had in attendance legislative members like Tayo Alashoadura Senate Upstream committee chairman and even though some of the speakers wished they were in attendance, when the plenary session on November 29 tackled this issue, there was scepticism it will yield desired result.

“We need transparency in the sector, because what usually happens is that things not discussed at public forums are usually introduced into the law,” Antaih said.

 

ISAAC ANYAOGU