The Federal Government has banned the export of crude oil meant for domestic refineries in the country in a bid to boost local refining capacity, reduce the import of refined petroleum products and curb pressure on foreign exchange supply.
Hitherto, about 500,000 barrels of crude oil per day meant for domestic refining have been finding their way to the international market as producers and traders shortchange the policy for quick foreign exchange proceeds.
Acting through the upstream sector regulator, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, the government warned that it will henceforth deny export permits for crude oil cargoes intended for domestic refining.
The commission in a statement in Abuja, insisted that any changes to cargoes designated for domestic refining must receive express approval from its chief executive.
In a letter dated February 2, 2025, addressed to exploration and production companies and their equity partners, the commission’s Chief Executive Officer, Engr. Gbenga Komolafe said diverting crude oil meant for local refineries is a violation of the extant laws of the country.
At a meeting last weekend, attended by more than 50 critical industry players, both refiners and producers blamed each other for inconsistencies in the implementation of the Domestic Crude Supply Obligation, DCSO, policy.
While refiners claimed that producers are not meeting supply terms and preferred to sell crude outside, forcing them to look elsewhere for feedstock, producers countered that refiners hardly meet commercial and operational terms, forcing them to explore other markets elsewhere to avoid unnecessary operational bottlenecks.
They, however, agreed that the regulator has put in place appropriate measures for effective implementation of the law.
The regulator cautioned against any further breaches from either party, and advised refiners to adhere to international best practices in procurement and operational matters.
The commission reminded producers not to vary the conditions stated in the DCSO policy without obtaining express permission from the chief executive before selling crude outside the agreed framework.
Komolafe referenced Section 109 of the Petroleum Industry Act (PIA) 2021, which aims to ensure stable supply of crude to domestic refineries and strengthen the nation’s energy security.
He said NUPRC would, henceforth, strictly enforce the policy regarding implementation and defaults by oil companies.
He stated that significant regulatory actions had already been taken by the commission, in line with enabling laws to enforce compliance with the DCSO.
These actions, according to him, include development and signing of the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023, as well as the creation of the DCSO framework and procedure guide for implementation.
However, it was gathered that the move is targeted at boosting the Naira-for-Crude programme, which aims at ensuring local refineries receive crude oil in naira and sell refined products to marketers in the local currency.
In its recent report, NUPRC disclosed that the Dangote Petroleum Refinery and seven other domestic refineries require 770,500 barrels of crude equivalent per day, Bopd, for processing in the first half (January – June) of 2025.
The refineries include 10,000 bpd OPAC refinery in Delta State, 5,000 bpd WalterSmith Refinery in Imo State, 2,500 bpd Duport Midstream in Edo State and the 1,500 bpd Edo Refinery in Edo State.
Others include the 11,000 bpd Aradel Refinery in Rivers State, 60,000 bpd old Port Harcourt refinery in Rivers State, 125,000 bpd Warri Refinery in Delta State and 110,000 bpd Kaduna Refinery in Kaduna State.
In its first half 2025 crude oil production forecast of producing oil companies and the refining requirement of functional refineries, the Commission, “The move is pursuant to Section 109 of the Petroleum Industry Act (PIA), 2021 and it is aimed at effective capacity utilization of the nation’s domestic refineries by ensuring a consistent supply of crude oil.”
According to the Commission, the allocation constitutes about 37 per cent of the forecasted first half 2025 average daily production of 2,066,940 bpd.
It maintained that the target will be met as its Project one million barrels launched in October 2024 has increased the capacity of the nation to produce crude for domestic use and export.
Credit: Vanguard
