In a significant move to resolve supply disputes and boost local refining capacity, the Nigerian government has mandated local crude oil producers and international oil companies (IOCs) to supply crude oil to the Dangote refinery and other domestic refineries. This directive follows a meeting between the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and oil producers.
The NUPRC, under the leadership of its chief executive, Gbenga Komolafe, has brokered an agreement that ensures local refineries receive crude oil at market prices. This development is aimed at ending the longstanding supply disputes between local refineries and oil producers, including IOCs.
Commitment to Supply and Price Regulation
During a virtual meeting held on July 11, 2024, the oil producers, represented by the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), agreed to the new supply scheme. This agreement is expected to benefit both producers and refineries, ensuring a steady supply of crude without unfair pricing practices. The parties have committed to providing the NUPRC with monthly cargo price quotes on crude supply and delivery to facilitate monitoring and regulation of transactions.
Presidential Backing
Komolafe emphasized President Bola Tinubu’s commitment to fostering a conducive business environment for both producers and refineries. This initiative is part of the broader efforts to implement key sections of the Petroleum Industry Act (PIA), particularly those related to pricing and domestic crude supply.
In recent developments, Edwin Devakumar, Vice President of Oil and Gas at Dangote Industries Limited (DIL), accused IOCs of sabotaging the Dangote refinery by inflating premium prices above market rates. This obstruction forced the refinery to import crude from other countries, such as the United States. The Dangote refinery, with a capacity of 650,000 barrels per day, is set to begin petrol production and distribution this month, a move expected to reduce Nigeria’s dependency on imported petroleum products.
Monitoring and Regulatory Measures
The NUPRC has pledged to closely monitor the pricing models used by oil producers to ensure they do not disadvantage local refineries. Local producers and refinery owners are required to submit cargo price quotes on crude supply and delivery to the NUPRC, facilitating transparency and fair trade practices in the sector.
Bottom Line
This new directive by the Nigerian government marks a significant step towards stabilizing the local refining industry and ensuring that local refineries, including the Dangote refinery, are not starved of necessary crude supplies. The implementation of these measures is expected to enhance the efficiency and output of domestic refineries, contributing to the overall growth of Nigeria’s oil and gas sector.
