In this post we will generally look at midstream and downstream petroleum anti-competition and customer protection regulations, 2023.
INTRODUCTION
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (Otherwise known as “The Authority”) was created in September 2021 in line with the Petroleum Industry Act which seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and development of Host Communities.
The Authority is responsible for the technical and commercial regulation of the midstream and downstream operations in Nigeria.
With the scrapping of three hitherto extant oil regulatory agencies: Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) and Petroleum Equalization Fund (PEF), The Authority was birthed to a new dawn with the key objective to establish a progressive fiscal framework that encourages investment in the Nigerian petroleum industry, provides clarity, enhances revenues for the government while ensuring a fair return for investors.
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What Is Midstream and Downstream Petroleum
Midstream petroleum: Is the Transportation and Storage of Crude Oil and Natural Gas, while downstream petroleum: refers to the Conversion of Crude Oil and Natural Gas into thousands of Finished Products.
Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) stimulate and create an enabling environment that drives sustainable development across Nigeria’s Midstream and Downstream value chain for all stakeholders. Through effective regulatory oversight which accelerates and deepens the economic development while ensuring sufficient product distribution and supply at an equitable and fair price.
Midstream And Downstream Petroleum Anti-Competition
The deregulation of the downstream petroleum sector following the removal of petrol subsidy is expected to spur mergers and acquisitions as fresh competition begins to take shape.
Petrol marketers and the operator of the sector said the removal of petrol subsidy has opened up the market to increased competition, prompting marketers to explore strategic options to maintain or increase their market share. Existing businesses may join forces or acquire other companies to strengthen their market position, improve efficiency, and gain a competitive advantage in the deregulated market.
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Ogbugbo Ukoha, executive director of distribution systems, storage and retailing infrastructure at Nigerian Midstream and Downstream Petroleum Regulatory Authority, said there is a likelihood of mergers and acquisitions taking place among companies.
“It is possible we will see mergers and acquisitions go on. It is possible that retail outlets will be structured in a way that is highly optimised,” he said.
He said deregulation will unlock investment opportunities for pipeline infrastructure, coastal vessels for marine transportation, and reception facilities.
He said it will bring clarity to consumption figures, attract multiple players to the sector and foster competition among various fuels, including Liquefied Petroleum Gas (LPG), Premium Motor Spirit (PMS), and Compressed Natural Gas (CNG).
Olumide Adeosun, chairman of Major Oil Marketers Association of Nigeria (MOMAN), said the country needs investments to expand the fuels market.
“What we are going to see with the direction of flow of the market today is that there is going to be consolidation in order to optimize the barriers to entry,” he said. “27,000 stations are too much to offer quality service to customers.”
He said the adoption of technologies for improved distribution efficiency and customer experience, along with improved corporate governance and industry self-regulation, will be promoted.
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Mergers and acquisitions are a strategic response to the changing market dynamics to optimize operations and improve overall competitiveness. Restrictive agreements, often referred to as cartels, must be dismantled to promote fair competition and prevent anti-competitive practices. Dominant market players must be cautious not to abuse their position by excluding competitors or engaging in discriminatory practices and pricing strategies.
Customer Protection Regulations, 2023.
The Federal Competition and Consumer Protection Commission said that the commission has identified a “significant and potentially inexplicable emerging increase and lengthening of wait-times in procuring fuel at filling stations in certain locations across the country.”
The emerging hardship on motorists and other consumers, the statement said, invariably impedes commerce, traffic and presents other difficulties, unintended consequences and financial constraints for citizens.
The Commission said it is in engagement with the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA); and Major Oil Marketers Association of Nigeria (MOMAN).
“The outcome of these engagements between the top-level Executives of the Commission and these other relevant entities, as well as key operatives, demonstrates that, there is no operational basis or sufficiently diminished/acute reduction in product availability at both supply and retail points in the value chain to justify the hardship and constraints otherwise emerging,” the statement said.
“The Commission adopts the Advisory issued by NMDPRA on May 29, 2023, advising consumers not to engage in panic purchases or otherwise stockpiling products in a manner inconsistent with regular periodic purchases and consumption.
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“Petroleum products are generally flammable and require transportation, dispensation, consumption and storage in strictly controlled and regulated manners. Any contrary approach to these strictly regulated manners constitutes danger and risk of significant losses, even fatality.
“As such, in accordance with the assurances of the NMDPRA and MOMAN that existing supplies are not insufficient for regularly established consumption levels, the Commission encourages consumers not to modify their regular purchase and consumption patterns.
The Federal Competition and Consumer Protection Act, 2018 (FCCPA) prohibits deceptive or unconscionable business practices in the oil and gas sector like obnoxious practices or unscrupulous exploitation of consumers by oil and gas operators, trade associations, and even individuals and any mutual understanding or decisions with a purpose or effect that prevents, restricts or distorts competition, specifically, and particularly including price-fixing or limiting distribution or supply.
It noted further that section 108 (1) prohibits any arrangements that unduly limit the production, transportation, storage and or supply of products, including for the purpose of enhancing price; while section 127 (1) prohibits supplying products at prices or on terms that are manifestly unfair, unreasonable or unjust.
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The Commission possesses the will and desire, and is committed to the strictest enforcement of the law. Product marketers have been informed that any infringement which distorts the market or enables others to exploit consumers and perpetuate inconvenience will be subject to the aggravated and highest spectrum of penalties where evidence supports violation.
Organized marketing or trading associations/platforms such as MOMAN and the Independent Petroleum Marketers Association of Nigeria (IPMAN) are in particular invited to note this and their collective and individual possible exposure in the event of evidence-supported violations.