Nigerian Oil Regulator Takes Steps to Ensure Local Refineries Receive Adequate Crude Supply

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has initiated efforts to ensure local crude oil refineries in the country receive uninterrupted feedstock, in alignment with the Petroleum Industry Act (PIA). The move comes in anticipation of the start of operations at the 650,000-barrel-per-day Dangote refinery, which is set to be Africa’s largest. The NUPRC is determined to prevent any shortages of feedstock for domestic refineries.

Key Points

1. Domestic Obligations and the PIA: The NUPRC’s Chief Executive, Mr. Gbenga Komolafe, emphasized the importance of fulfilling domestic obligations to local refineries, as mandated by the PIA. The law requires oil producers to allocate a portion of their production for domestic consumption, aiming to ensure a steady and reliable supply of petroleum products for the country’s needs.
2. Willing Buyer and Seller Basis: Crude oil supply to the domestic market is to be conducted on a “willing buyer and willing seller” basis, according to the PIA. The Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) will report any inadequate supply to the refineries to the NUPRC.
3. Request for Quotation (RFQ): When there is a reported crude supply shortage, the NUPRC will issue an RFQ to producers, asking for quotations to bridge the deficit. Subsequently, the commission will facilitate contract negotiations between stakeholders, including affected refineries.
4. Sanctions for Non-Compliance: The PIA stipulates that companies failing to comply with their domestic supply obligations will not be granted export permits for crude oil from their lease areas. While sanctions and penalties are not the primary focus, the NUPRC will take steps to penalize violators.
5. Sensitization and Cooperation: The NUPRC aims to sensitize oil producers to the importance of implementing the domestic supply obligation to Nigerian refineries. With new refineries set to come online, it’s crucial to ensure they receive sufficient feedstock.

Challenges and Resolutions

• Currency of Transaction: Parties to crude supply contracts can agree on the currency of transaction, whether in naira or dollars, in Nigeria’s “willing buyer, willing seller” market. In case of disagreements, the NUPRC will intervene to find solutions.
• Variety of Crude Oil: Refineries may have different capacities to process specific types of crude oil. The NUPRC will consider these variations when making decisions regarding feedstock allocation.
• Information Disclosure: The NUPRC requires back-up information rather than just raw figures on crude supply contracts. It’s more interested in ensuring obligations to refiners are met rather than focusing on prices.

Read Also:

• NUPRC And FG Disagree Regarding Seplat’s Acquisition Of Mobil
• JUST IN: Buhari Appoints Committee For Petroleum Act
• NNPC Becomes Commercial Entity In The Midst Of Gasoline Crisis

Conclusion

The NUPRC’s efforts to ensure local refineries receive adequate crude supply align with the PIA’s domestic supply obligation. This initiative is essential for the stability of the domestic refining industry, especially with the imminent start of the Dangote refinery. While challenges like currency of transaction and crude variety exist, the NUPRC aims to address them and prevent shortages of feedstock for domestic refineries, contributing to Nigeria becoming a net exporter of refined products.

Follow us on Facebook