PIA-2021_Petroleum Administration-Part VI (Mid and Downstream Other).pdf

Petroleum Industry Act, 2021 A 260 2021 No. 6 Wholesale prices for petroleum products. 206.—(1) The holder of a wholesale petroleum liquids supply licence and a wholesale customer shall, subject to the provisions of this Chapter, negotiate the wholesale prices directly between the parties on an...

Petroleum Industry Act, 2021 A 260 2021 No. 6 Wholesale prices for petroleum products. 206.—(1) The holder of a wholesale petroleum liquids supply licence and a wholesale customer shall, subject to the provisions of this Chapter, negotiate the wholesale prices directly between the parties on an arm’s length basis, provided that the transfer price shall be transparent and reflect the transfer price between the parties. (2) The Authority shall have power to monitor bulk sale of petroleum products and may publish market-based prices in order to ensure that the transactions are undertaken in a manner that transfer pricing between the supplier and the wholesale customer are undertaken at a transparent arm’s length basis. (3) The supplier shall, within 14 days of the consummation of a transaction relating to the bulk sale of petroleum products, provide the Authority with information relating to the transaction including, where applicable, the cost incurred by the supplier in the production or supply of the product and other information relevant to the price at which the product is sold. (4) A supplier who knowingly provides information, which is false or misleading with respect to the information required in subsection (3) is liable to a fine stipulated by the Authority in regulations. Pricing principles in relation to petroleum products. 207. Where under section 205 (2) of this Act, the Authority regulates the tariffs and prices of a licensee, the Authority shall allow the seller to recover reasonably and prudently incurred costs, including a reasonable return on the capital invested in the business. Publication of prices. 208. Licensees shall publish prices as required by the Authority in a manner that ensures that the customers are able to identify and calculate the extent of charges for which they will become liable. PART VI—OTHER MATTERS RELATED TO MIDSTREAM AND DOWNSTREAM OPERATIONS Public service obligations 209. The Authority may issue regulations imposing public service obligations on licensees or a class of licensees in relation to the maintenance of strategic stock for which the Authority shall approve a tariff to be paid by the consumers. Competition and market regulation. 210. The Authority shall, subject to the provisions of the Federal Competition and Consumer Protection Act, have the responsibility to— Act No 1, 2018. (a) monitor the state of the markets regulated by the Authority ; (b) administer, monitor and ensure compliance with the provisions of this Act and any law or regulation issued in respect of competition and market regulation ; Petroleum Industry Act, 2021 2021 No. 6 A 261 (c) monitor market behaviour including the development and maintenance of competitive markets ; (d) arrest situations of abuse of dominant power and restrictive business practices ; (e) assess whether the petroleum industry is operating efficiently or the existing market arrangements may constitute barriers to entry into the market for new market participants ; (f ) determine whether there is any anti-competitive activity being carried on and exercise its powers under this section to prevent the continuance of the activity ; and (g) determine any pre-conditions and any transitional arrangements required for any services to be offered competitively. 211.—(1) Subject to the provisions of the Federal Competition and Consumer Protection Act, the Authority shall have the responsibility to prevent anti-competitive behaviour with respect to midstream and downstream petroleum operations and may take any or a combination of the following actions— (a) monitor and determine whether any conduct by a licensee or any other person operating or intending to operate in midstream and downstream petroleum operations— (i) has the purpose or effect of substantially lessening competition in any segment of the midstream and downstream petroleum operations, (ii) may likely result in anti-competitive or discriminatory conduct, including an unlawful exercise of market power that may prevent customers from obtaining the benefits of a properly functioning and competitive market, (iii) may amount to practices which reflect an apparent or probable effect of crippling, excluding or deterring the entry of another person into midstream and downstream petroleum operations, or (iv) may likely be indicative of an abuse of dominant position in respect of the provision of any service ; (b) consider how best to prevent or mitigate abuse of market power in its decisions and determinations regarding matters including licence applications, grant of licence, licence terms and conditions and the regulation of prices for services in competitive markets ; and (c) where, in the opinion of the Authority there is or may be, anticompetitive behaviour and in particular an abuse of market power, the Authority shall— Power to prevent anticompetitive behaviour. Act No 1, 2018. A 262 2021 No. 6 Petroleum Industry Act, 2021 (i) issue “cease and desist” orders as may be required, (ii) require and compel the disclosure of information from licensees, (iii) undertake inquiries and investigations, and (iv) levy fines prescribed by regulations issued by the Authority, which shall not exceed 5% of the annual turnover of the company for the preceding year. (2) Notwithstanding the provisions of this section, where the Authority deems it to be in national interest or necessary to preserve or promote the benefits of a functional and effective competitive market, the Authority may, on the application by a licensee or other person with the ability to influence the price of petroleum products,— (a) give written approval to the application upon such terms and conditions and impose other requirements as it may deem appropriate ; and (b) issue directions to prevent or mitigate any conduct that shall or is likely to lead to the unlawful exercise of market power that will prevent customers from obtaining the benefits of a properly functioning and competitive market. (3) The Authority may at any time withdraw an approval granted under subsection (2) upon such terms and conditions as it may deem appropriate. Separation of certain licenced activities. 212.—(1) The Authority may require the holder of a licence to maintain separation in management, accounting or legal entities of its licenced or permitted activities, which may prohibit the holder of the licence from directly holding licences of another type. (2) Licenced activities between a holder of a licence and an affiliate shall be undertaken in a manner that the transfer pricing between both entities is undertaken on a transparent arm’s length basis and in a manner that reflects the pricing principles contained in sections 170 and 207 of this Act. (3) A holder of a licence shall not, without the prior written consent of the Authority, directly or indirectly acquire an interest in, purchase or merge with another holder of a licence or an affiliate of a holder of a licence. Nondiscrimination among customers. 213. A holder of a licence or permit shall not discriminate between customers or classes of customers or their related undertakings or network users in respect of access, tariffs, prices, conditions or standards of service under section 116 of this Act. Petroleum Industry Act, 2021 2021 No. 6 A 263 214. In the exercise of its powers under this Chapter, the Authority may consider— Considerations for exercise of the Authority’s powers. (a) the relevant economic market ; (b) global trends in the relevant economic market ; (c) the effect on the number of competitors in the market and their respective market shares ; (d) the effect of barriers to entry into the market ; (e) the effect of any activity on the range of services in the market ; (f ) the effect of the conduct on the cost and profit structures in the market ; (g) the ability of any independent licensee or operator to make price or tariff regulating decisions ; and (h) any other matter which the Authority may deem relevant. 215.—(1) Where, in the opinion of the Authority, any act or activity prohibited under this Chapter has been or is likely to be undertaken by any person, the Authority may— (a) serve a notice on the person, specifying the act or activity and its intention to issue a “cease and desist” order ; (b) direct the person to whom the notice is issued to do or not to do, the specified act or activity ; and (c) specify the time frame for compliance with the notice. Power to serve notice, issue “cease and desist” order. (2) Where the person to whom the notice or directive issued under subsection (1) fails to comply, the Authority may issue a “cease and desist” order. (3) The Authority may levy a fine not exceeding 5% of the annual turnover of the company for the preceding year or revoke the licence of any person who fails to comply with a “cease and desist” order or a directive issued under subsection (1). PART VII—COMMON PROVISIONS FOR UPSTREAM, MIDSTREAM AND DOWNSTREAM PETROLEUM OPERATIONS 216.—(1) The Commission and Authority shall consult with stakeholders prior to finalising any regulations or amendments to regulations. (2) The stakeholders to be consulted for any particular regulation shall be lessees, licensees and permit holders that may be impacted by the regulations and such other persons that may be interested in the subject matter of the proposed regulation. Consultation for regulations.