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How DPR Is Preventing Losses In Oil And Gas Industry

By Ajibola Abayomi,

July 10, 2018.

The Department of Petroleum Resources has explained how the agency has been combating leakages in the oil and gas sector.

Contrary to the insinuation in that the agency among other things did not have accurate data about the volume of crude oil and lacks effective supervision of the oil and gas industry, however, the DPR gave a clear explanation about its roles in the sector.

At a seminar organised by members of Association of Maritime Journalists of Nigeria (AMJON) on the danger of revenue leakage to the Nigeria economy in conjunction with House of Representatives, the Chief Legal Adviser of DPR, Kingston Chikwendu who represented the Director of the agency, Mr. Modecai Ladan, debunked several allegations against the establishment.

Below is the full text of his presentation.

 

(PREVENTION OF LOSSES IN NIGERIA OIL AND GAS INDUSTRY THROUGH EFFECTIVE REGULATION BY THE DPR) ▪

A PRESENTATION BY THE DIRECTOR OF PETROLEUM RESOURSES TOPIC 1 DEPARTMENT OF PETROLEUM RESOURCES ▪ BRIEF HISTORY OF THE DPR ▪ ▪ The Department of Petroleum Resources (DPR) came into existence as a queasyindependent Department in the Ministry of Petroleum Resources in 1988 following an act of excision of roles in the then Nigerian National Petroleum Corporation (NNPC) by the Military Government of the day. This was part of a reformation effort by the Government then to separate the policy and policy implementation role from the commercial role of the NNPC in the Industry.

▪ Before the excision, the regulatory over-sight of the Petroleum Industry was carried out under the Inspectorate Division of the NNPC. By creating the DPR in 1988, government transferred the role of the inspectorate to the Department under the direct supervision of the Minister of Petroleum Resources as an arm of the Executive.

▪ In a nutshell therefore, the emergence of the DPR as an executive agency of the Federal Government seized with the responsibility of supervising the oil and gas industry in Nigeria was part of the continuing reformation of the Nigerian Oil and Gas Industry which began in 1977 with the establishment of NNPC by an Act of the National Assembly.

INTRODUCTION 2 DEPARTMENT OF PETROLEUM RESOURCES ▪

The role of the DPR in the Petroleum Industry can be broadly categorized into the following broad headings: ▪ ▪ Policy Implementation ▪ Enforcement of Petroleum Laws and Regulations ▪

Revenue Generation ROLE OF DPR 3 DEPARTMENT OF PETROLEUM RESOURCES ▪ This role entails the Director of Petroleum resources to from time to time provide expert technical and non-technical advice to the Minister of Petroleum Resources and the Federal Government on policies relating to the Petroleum industry as well as undertake the implementation of such policy decisions.

▪ Policy issues which the Department implements cuts across the downstream, the midstream and the upstream sectors of the petroleum industry. For example, the DPR plays a critical role in seeing to the implementation of the Federal Government policies on the elimination of gas flaring and raising of the nation’s oil reserve to 40 billion barrels by 2020. ▪ POLICY IMPLEMENTATION 4 DEPARTMENT OF PETROLEUM RESOURCES ▪ This is a very broad area of activity for the DPR and probably the area of its activities which brings the Department in close contact with the public in Nigeria. Essentially is responsible here for enforcing all laws and regulations in Nigeria relating to Petroleum and Petroleum operations activities in Nigeria. ▪ Some of these laws and regulations include, the Petroleum Act and all the regulations made thereunder or made pursuant to it, the Oil Pipelines Act, Oil Terminals Dues Act etc. ▪ The instruments used by the Department in its role in this area include the powers to grant Licences, permits, approvals and authorizations for different types of activities in the industry. Beside these, the Department also has powers to impose penalties and fines for various non-compliance offences in relation to the Petroleum laws. ENFORCEMENT OF PETROLEUM LAWS AND REGULATIONS 5 DEPARTMENT OF PETROLEUM RESOURCES ▪ DPR undertakes various revenue collection duties for the Federal Government of Nigeria. The revenues generated and collected are: ▪ i) royalties on crude oil and gas, ▪ Ii)annual rental fees on OPLs and OMLs, ▪ iii) miscellaneous oil revenue including application fees and licence fees for the various licenses, permits, authorizations and approvals issued by the DPR, ▪ iv) Signature bonus payments generated from the grant of OPLs and OMLs, ▪ v) assignment fees, premiums and renewal bonuses upon the renewal of OPLs and OMLs, ▪ vi)as well as fees generated from data marketing etc. ▪ vii) gas flare penalty ▪ viii) other fines and monetary fines ▪ REVENUE GENERATION ROLE 6 DEPARTMENT OF PETROLEUM RESOURCES ▪ The DPR drives compliance with petroleum laws and regulations in Nigeria by ensuring the following: ▪ That activities in the oil and gas industry is carried out in accordance with methods and procedures which conform to the laws and regulations applicable in Nigeria and best global industry standards ▪ By regularly updating the various standards and procedures for the conduct of activities in the oil and gas industry ▪ By ensuring that operators in the industry obtain all relevant and necessary permits and or approvals for activities which they intend to carry out in the industry ▪ By ensuring that operators in the industry submit the necessary statutory data and reports relating to their various activities in the industry ▪ By physical monitoring and supervision of all relevant activities in the oil and gas industry that require monitoring ▪ By ensuring the enforcement of health, safety and environment standards for equipment’s, and facilities used in the oil and gas industry ▪ Conduct of on site inspection of oil and gas facilities and locations where oil and gas activities are carried ▪ Maintain presence at oil export terminals, tanks and depots to ensure accurate crude and product accounting for fiscalisation, quantity and quality assurance purposes ▪ By imposing penalties and fines for infringement of petroleum laws and regulations ▪ By supporting law enforcement agencies in the apprehension and prosecution of offenders against petroleum laws COMPLIANCE WITH PETROLEUM LAWS AND REGULATIONS DEPARTMENT OF PETROLEUM RESOURCES ▪ DPR operates a cashless revenue collection system, all remittances of fiscal payments are made directly to designated Federation account for each revenue ▪ Licensees undertake a self assessment of royalty and flared penalty, make payments to designated accounts within 60 days of production and advise the Department through the bank swift copies of all payments made ▪ The Department computes royalty and gas flared penalty payable on a monthly basis and annually for concession rentals ▪ The Department conducts comprehensive quarterly and annual reconciliation of revenue payments to ensure remittance of all fiscal payments due to the FGN Revenue Collection Process DEPARTMENT OF PETROLEUM RESOURCES ▪ Enhanced Compliance through Improved Enforcement & Stakeholder Engagement ▪ Use of policies e.g. the DGSO to drive down routine gas flaring and wastage of economic resource ▪ Technology adaptation including Process Automation for efficient and transparent industry administration – National Petroleum Monitoring System (NPMS) – Oil & Gas Industry Service Permit (OGISP) – Automated Downstream System (ADS) – Import & Export Permit System (IMPEX) ▪ Improved Ease of Doing Business Index through upgrade/optimization of all regulatory Procedures ▪ Strategy for Eliminating Revenue Leakages DEPARTMENT OF PETROLEUM RESOURCES Example (1)State of Gas Production, Utilization and Flare reduction 10 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 3,500,000,000 0 10 20 30 40 50 60% Flared Gas % Gas Flared Gas Produced % FLARED DEPARTMENT OF PETROLEUM RESOURCES Example 2: Trend of Revenue Collection (2010- 2016) DEPARTMENT OF PETROLEUM RESOURCES ▪ The DPR is fully committed to the improvement of oil and gas regulatory environment ▪ Its strategy of enhanced regulation through the deployment of technology and modern working tools has lead to increased efficiency and reduction of losses for the nation in the oil and gas industry

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