Federal Government of Nigeria reaches agreement with oil producers on supply of crude oil to local refineries

The federal government, through the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), has reached an agreement with producers to permit the sale of crude oil to domestic refiners at market prices.

This resolution ends a supply dispute that has strained relations with international oil companies.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) stated that it could not allow pricing issues to hinder domestic refining.

The NUPRC emphasized its commitment to preventing “crude supply profiteering,” while also ensuring that oil production remains profitable.

He said, “We will never allow price strangulation to disincentivise our domestic refining capacity optimisation”

He stated that the regulator would work to prevent “crude supply profiteering,” while also ensuring that oil production remains profitable.

To ensure transparency, the Chief Executive of the NUPRC Gbenga Komolafe requested monthly cargo price quotes on crude oil supply and delivery from both producers and refiners.

He emphasized that it is the regulator’s responsibility to balance upstream development with a sustainable domestic energy supply chain.

Backstory

Earlier in the year, the NUPRC directed local and international oil companies to prioritise the supply of crude oil to local refineries. The regulator further set a target of 483,000 barrels to local refineries with the Dangote refinery expected to receive 325,000 barrels daily.

Additional refineries expected to benefit from the crude oil supply include the Warri and Port Harcourt refineries, which are slated to receive 75,000 and 54,000 barrels of crude oil per day, respectively. Meanwhile, smaller refineries such as Waltersmith, OPAC, and Niger Delta Petroleum Refinery, among others, are set to receive 10,000 barrels per day or less.

Later in April, the NUPRC mandated all oil companies in Nigeria to supply crude oil to domestic refineries that are unable to source it locally. Only after meeting these domestic supply obligations are producers allowed to export crude oil. The Petroleum Industry Act (PIA) mandates that international oil companies must first meet local demand by supplying crude oil to domestic refineries before exporting any surplus.

However, last month, Devakumar Edwin, the Vice President of Oil and Gas at Dangote Industries Limited (DIL), accused International Oil Companies (IOCs) in Nigeria of deliberately attempting to undermine the Dangote Oil Refinery and Petrochemicals.

Edwin asserted that the IOCs are intentionally obstructing the refinery’s efforts to purchase local crude by inflating premium prices above market rates. This forces the refinery to import crude from distant countries such as the United States, resulting in significantly higher costs.

Nigerians expected the 650,000 barrels Dangote refinery to significantly or end the country’s petrol import dependence in the era of post-subsidy removal.