1. Introduction: Institutional Restructuring under the PIA 2021
The enactment of the Petroleum Industry Act 2021 (PIA) marked a significant restructuring of the legal framework governing Nigeria's petroleum industry. One of the most important changes introduced by the Act was the separation of regulatory responsibilities between the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which is responsible for upstream petroleum operations, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), which regulates the technical and commercial aspects of midstream and downstream petroleum operations.
As Oluwatimilehin Ilori observes in his study of the Nigerian petroleum licensing regime, the PIA moved Nigeria away from the former arrangement in which the Department of Petroleum Resources exercised broad regulatory responsibility across the industry and towards sector-specific regulatory institutions and licences (Oluwatimilehin Ilori, The Nigerian Oil and Gas Industry Licensing Regime in 2024). This institutional restructuring is central to understanding how a person or company must now approach downstream petroleum licensing in Nigeria.
2. Establishment and Mandate of the NMDPRA
The PIA establishes NMDPRA under sections 31 and 32 and gives it responsibility for the technical and commercial regulation of midstream and downstream petroleum operations. Section 33 further provides the Authority with regulatory powers necessary to perform its functions.
The creation of NMDPRA was intended to address the institutional fragmentation that existed before the PIA. The International Monetary Fund, in its assessment of the Nigerian reforms, similarly identified the creation of separate upstream and midstream/downstream regulatory agencies as one of the principal governance changes introduced by the Act (IMF, Nigeria: 2021 Article IV Consultation). NMDPRA itself explains that its establishment brought together the former Petroleum Products Pricing Regulatory Agency, the Petroleum Equalisation Fund and the midstream and downstream divisions of the former Department of Petroleum Resources (NMDPRA, About Us).
3. Shift to Activity-Specific Regulatory Approvals
The significance of this reform is that downstream petroleum activity is no longer regulated simply by reference to a general petroleum licence. The relevant question is what activity the operator intends to undertake and what regulatory authorisation that particular activity requires.
The PIA contemplates licensing, permits and authorisations for activities within the midstream and downstream value chain, while the regulations made pursuant to the Act provide the detailed procedures and technical requirements. Ilori therefore correctly describes the post-PIA regime as one in which businesses must obtain sector-specific licences from the appropriate regulator before undertaking regulated petroleum operations.
Corporate Capacity vs. Regulatory Licensing
This distinction is particularly important because the expression "downstream petroleum operations" covers a wide range of activities. Refining, petroleum products storage, transportation, wholesale supply, distribution, retailing, importation and exportation are not necessarily authorised by the same licence. Gas-related activities also operate within their own regulatory framework.
The legal practitioner advising a prospective investor must therefore begin by identifying the precise nature of the proposed business and then determining the applicable licence, permit or authorisation. Incorporation of a company under the Companies and Allied Matters Act does not, by itself, confer the legal authority to conduct regulated petroleum operations. Corporate capacity and petroleum regulatory approval are separate matters.
4. The 2025 Midstream and Downstream Petroleum Operations Regulations
The detailed licensing framework is now found principally in the Midstream and Downstream Petroleum Operations Regulations 2025. The Regulations are particularly important because they replaced the earlier 2023 Midstream and Downstream Petroleum Operations Regulations and several other earlier regulatory instruments.
The official NMDPRA regulatory portal lists the 2025 Regulations among its gazetted regulations and separately identifies the surviving 2023 instruments dealing with matters such as environmental regulation, safety, gas distribution, gas pricing and decommissioning (NMDPRA, Gazetted Regulations). Consequently, legal advice on downstream licensing should not rely uncritically on the 2023 operational regulations, since the 2025 Regulations have become the principal operational licensing instrument.
Establishing, Constructing, and Operating Petroleum Facilities
A particularly important feature of the 2025 Regulations is the distinction between establishing, constructing and operating a petroleum facility. These are separate stages of regulatory approval. An authorisation to establish a facility does not necessarily amount to permission to construct it, just as permission to construct does not automatically authorise the commencement of commercial operations.
The distinction reflects the nature of petroleum facilities as high-risk infrastructure whose design, construction, commissioning and operation require different forms of regulatory oversight. The Regulations accordingly provide for licences dealing with establishment, construction and operation of relevant midstream and downstream facilities.
The Regulatory Lifecycle of Major Infrastructure
The effect is especially clear in relation to refineries. A person intending to establish a refinery must satisfy the regulatory requirements applicable to the establishment of the facility before proceeding to the construction stage. Construction itself remains subject to regulatory requirements, while operation requires the appropriate operating licence and compliance with the technical and safety conditions imposed by the Authority.
The same general principle applies to other major petroleum infrastructure, including terminals, bulk storage facilities and certain pipeline systems. The licensing process is therefore better understood as a regulatory lifecycle than as a single application for permission to do business.
Facility Modifications and Commercial Authorisations
This approach also has consequences for existing facilities. A downstream operator cannot necessarily modify its facility merely because it already possesses an operating licence. Changes to capacity, configuration or product slate may affect the regulatory status of the existing approval. This is particularly relevant to refinery expansion, storage expansion and the conversion or modification of petroleum facilities. A prudent operator must therefore consider regulatory approval before making material changes to an already licensed facility.
The licensing regime also extends beyond the physical infrastructure. A company may own a depot, refinery or storage facility and still require separate authority for the commercial activity it intends to conduct through that facility. For example, the authority to operate a storage facility does not necessarily amount to an unrestricted authority to import, export or wholesale petroleum products. This separation between the licensing of infrastructure and the licensing of commercial petroleum activities is one of the most important practical aspects of the modern regulatory regime.
5. Petroleum Import Regulation and Contemporary Disputes
The same principle can be seen in the regulation of petroleum products importation. The PIA does not treat importation as an unrestricted commercial activity. Section 317 of the Act provides the statutory basis for the regulation of petroleum product imports where domestic refining capacity is insufficient to meet national demand.
The practical importance of this provision has become increasingly visible as domestic refining capacity has expanded. In March 2026, for example, NMDPRA suspended the issuance of gasoline import licences after determining that domestic supply was sufficient to meet demand. Reuters reported that the decision represented an active application of the PIA's approach to petroleum imports, under which imports may be authorised where domestic production is insufficient (Reuters, 10 March 2026). The episode demonstrates that a petroleum import licence is not simply a permanent commercial entitlement; its exercise is affected by the statutory and regulatory conditions governing the domestic market.
The Dangote Refinery Import Licensing Litigation
This issue has also produced important contemporary litigation. Dangote Petroleum Refinery commenced proceedings in 2026 challenging the issuance or renewal of certain petroleum import licences. The dispute concerns the interpretation and application of the PIA's provisions on petroleum imports and the extent to which continued imports should be permitted where domestic refining capacity exists.
NNPC and NMDPRA have contested the refinery's position, arguing, among other things, that the PIA does not create an absolute prohibition on imports. The litigation was still ongoing as of May 2026 (Reuters, 22 May 2026). The case is therefore important, but because it remains pending, it should not presently be cited as establishing the final judicial interpretation of the relevant provisions.
6. Judicial Review of NMDPRA Powers & Case Law Precedents
Judicial consideration of NMDPRA's powers has nevertheless already begun. In IHS Nigeria Ltd & Anor v Nigerian Midstream and Downstream Petroleum Regulatory Authority, Suit No. FHC/ABJ/CS/1029/2023, the Federal High Court considered a challenge by IHS Nigeria Limited and INT Towers Limited to levies imposed by NMDPRA on petroleum products imported for their operations.
The applicants argued that the relevant products were not "sold in Nigeria" because they were used in their own business operations. The Federal High Court rejected the challenge and upheld the Authority's power in relation to the statutory levies. The decision has been described as one of the first significant judicial decisions on the operation of the PIA's new regulatory framework (The Guardian, 11 February 2024). Its importance extends beyond the particular levy in dispute because it illustrates the courts' willingness to recognise the statutory regulatory authority conferred upon NMDPRA by the PIA.
Regulatory Reach Across Industrial Non-Oil Companies
The case is also significant because it demonstrates that petroleum regulation may apply to companies whose principal business is not the production or sale of petroleum. An industrial company that imports, stores or otherwise handles petroleum products may still fall within the regulatory framework where the relevant activity is one regulated by the PIA. The legal character of the activity, rather than merely the company's principal business, becomes important in determining whether NMDPRA's regulatory jurisdiction is engaged.
7. Environmental Protection & Safety Compliance
Licensing must also be distinguished from environmental approval. Obtaining an NMDPRA licence does not remove the need to comply with applicable environmental legislation. The PIA expressly incorporates environmental protection into the petroleum regulatory framework, while NMDPRA has issued separate Midstream and Downstream Petroleum Environmental Regulations 2023. The Authority's official regulatory portal identifies these regulations separately from the 2025 Operations Regulations (NMDPRA, Gazetted Regulations).
Depending upon the nature and scale of a project, an operator may therefore have obligations under the Environmental Impact Assessment Act, applicable federal environmental regulations, NMDPRA environmental requirements and relevant state laws. Petroleum licensing should consequently be viewed as one component of a wider regulatory approval structure.
Judicial Recognition of Downstream Safety Risks
Safety regulation is similarly inseparable from downstream licensing. The PIA gives NMDPRA responsibility for technical regulation, while the Authority's Midstream and Downstream Petroleum Safety Regulations 2023 provide additional requirements concerning safe petroleum operations. The legal importance of safety is not new. Long before the PIA, the Nigerian courts had recognised the risks associated with petroleum retail facilities. In Ugochukwu v Unipetrol (Nig.) Plc (2002), the Supreme Court considered liability arising from an accident connected with a filling station. Although the decision arose under the earlier legal framework and should not be presented as an interpretation of the PIA, it remains useful in demonstrating the longstanding legal consequences associated with the operation of downstream petroleum facilities.
8. Commercial Transactions & Asset Transfers
The commercial relationship between a petroleum operator and another company must also be distinguished from the regulatory licence. In Ajayi v Total (Nig.) Plc (2014), the Supreme Court considered a dispute involving a filling station and the contractual relationship between the parties. The decision illustrates an important point for modern downstream transactions: a petroleum licence, a lease or land interest, and a marketing or dealership agreement are different legal arrangements. The existence of one does not necessarily establish the existence or validity of the others. This distinction becomes particularly important when a business acquires an existing filling station, depot or other downstream asset.
Mergers & Acquisitions Regulatory Consent
Another important area is the transfer of petroleum interests. The modern regulatory regime does not permit a petroleum licence to be treated as an ordinary corporate asset that can simply be sold or transferred without regulatory involvement. The PIA and the 2025 Regulations impose regulatory requirements concerning the assignment or transfer of relevant licences, permits and interests. This has considerable implications for mergers and acquisitions. A purchaser of a downstream petroleum company must investigate not only the company's corporate ownership and physical assets but also the status of its NMDPRA licences, outstanding regulatory obligations and whether the proposed transaction requires regulatory consent.
This is particularly important where a transaction is structured as a share acquisition. A change in corporate ownership may have regulatory consequences even though the licence itself remains registered in the name of the same company. Consequently, petroleum regulatory due diligence should form part of any acquisition involving a refinery, depot, terminal, pipeline, retail network or other regulated downstream asset. The purchaser should verify the scope and validity of every relevant licence, whether the facility corresponds with the approved design and capacity, whether there are outstanding regulatory penalties or levies, and whether any previous modification or expansion was undertaken with the required approval.
9. Enforcement Powers and Scope of Regulatory Oversight
The continuing nature of petroleum licensing is also reflected in the Authority's enforcement powers. The PIA does not contemplate a system in which an operator obtains a licence and thereafter operates without continuing regulatory supervision. NMDPRA is empowered to monitor compliance and take enforcement measures where regulated activities are undertaken without the appropriate licence, permit or authorisation or where the conditions of the regulatory framework are breached.
In May 2026, NMDPRA publicly warned operators that conducting midstream and downstream petroleum activities without the appropriate regulatory approval could attract sanctions under the PIA. The warning expressly extended to operators in free trade zones and other designated areas (NMDPRA-related report, TheCable, 19 May 2026). This is consistent with the statutory position that the location of an operation does not, by itself, remove it from NMDPRA's regulatory jurisdiction.
10. Conclusion: Strategic Takeaways for Legal Practitioners & Investors
The licensing framework must therefore be understood as part of the PIA's wider attempt to create a more predictable petroleum regulatory environment. Izu-Emmanuel Ovieme and Thomas Nworgu Chioma, in their examination of the institutional framework created by the PIA, argue that the Act was intended to improve effectiveness, transparency and accountability by clarifying the functions of the principal petroleum regulatory institutions (Ovieme & Chioma, An Appraisal of the Legal Roles of the Principal Regulatory Institutions in the Petroleum Industry of Nigeria under the Petroleum Industry Act 2021). The practical value of that institutional separation, however, depends upon operators understanding the boundaries of the licences and the continuing obligations attached to them.
Ultimately, navigating downstream licensing under the PIA requires a shift from the older idea of obtaining a general petroleum permit towards a more precise activity-based approach. The first question for an operator should not be whether it possesses a petroleum licence in the abstract, but whether it possesses the particular licence, permit or authorisation required for the activity it intends to undertake. The second question should be whether the proposed facility, transaction or modification falls within the scope of the existing approval. The third is whether the operator is complying with the continuing environmental, safety, financial, reporting and operational obligations imposed by the regulatory framework.
The PIA has therefore made downstream licensing both more structured and more demanding. The creation of NMDPRA has concentrated regulatory responsibility, while the subsequent regulations have developed detailed rules for particular activities and facilities. The 2025 Midstream and Downstream Petroleum Operations Regulations are especially important because they provide the current central framework for licensing and operations, while separate environmental, safety, gas and other regulations address specialised aspects of the sector.
For investors, operators and legal practitioners, the central lesson is that downstream licensing is not a single event at the beginning of a project. It is a continuing legal relationship between the operator and the regulator, extending from the establishment of a facility through construction, commissioning and operation and, where necessary, modification, transfer and eventual decommissioning. The effectiveness of the PIA's licensing regime will ultimately depend not only upon the breadth of NMDPRA's statutory powers but also upon the consistency, transparency and predictability with which those powers are exercised.
The emergence of litigation concerning levies, import licences and the scope of NMDPRA's regulatory authority indicates that the courts will increasingly have an important role in defining the limits of that regulatory power. For now, however, the statutory position is clear: downstream petroleum operations in Nigeria are subject to a specialised licensing regime administered principally by NMDPRA, and lawful participation in the sector requires careful attention not merely to obtaining a licence but to understanding exactly what that licence permits and the continuing obligations it imposes.
