NUPRC, OPTS Agree on Sustainable Crude Oil Supply Structure for Dangote and Local Refineries
In a strategic move to secure adequate crude oil supply for Nigerian refineries, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has announced a collaborative agreement with oil producers. This agreement, established during a crucial meeting called by NUPRC, aims to create a sustainable template for supplying local refineries with the necessary crude feedstock.
According to a statement released by the NUPRC on Thursday, the Federal Government and local crude oil producers have committed to ensuring a viable crude oil supply to Nigeria’s refineries based on a market-determined pricing system. This initiative seeks to balance the business interests of operators while ensuring refineries are sufficiently supplied with feedstock.
A significant challenge has been the pricing issue for local crude sold to Nigerian refineries. The Dangote Refinery recently highlighted concerns about the International Oil Companies (IOCs) charging a mark-up price of up to $6 above standard rates. In response, the NUPRC has directed oil refiners in the country to provide monthly price quotes on crude supply, ensuring a more streamlined process.
The meeting, convened by the Chief Executive of NUPRC, Gbenga Komolafe, included representatives from the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI). The parties agreed on a mutually beneficial framework to prevent local refineries from being hindered by excessive pricing.
The focus of the meeting was a review of the framework for the operationalization of the domestic crude oil supply obligation template. This effort is part of implementing key sections of the Petroleum Industry Act (PIA), particularly concerning pricing and crude supply to domestic refineries.
Komolafe emphasized President Bola Tinubu’s commitment to fostering a fair business environment for producers and refiners. He stressed the importance of a pricing model that supports both the upstream sector and domestic refineries without causing financial strain.
Komolafe directed that producers and refiners provide the NUPRC with monthly cargo price quotes on crude supply and delivery to facilitate effective monitoring and regulation of transactions. “We need to have the price quotes monthly,” he stated.
Highlighting the link between the Domestic Crude Supply Obligation (DCSO) and Nigeria’s energy security, Komolafe mentioned that his team is refining regulatory processes to address these challenges. He reiterated the regulator’s commitment to transparent processes and a willing buyer/willing seller provision.
Komolafe assured that the regulator would prevent cost under-recovery in the upstream sector and avoid crude supply profiteering, which could undermine domestic refining capacity. Appropriate pricing will be driven by the Fiscal Oil Price (FOP) published by the commission under the PIA’s provisions.
The NUPRC is focused on attracting investment to boost upstream development and optimize hydrocarbon resources while ensuring a sustainable domestic energy supply in the midstream and downstream sectors.
Meanwhile, Nigeria’s new Dangote mega-refinery continues to increase its intake of US crude oil, according to Bloomberg. The refinery, which aims to reduce Nigeria’s dependency on foreign fuel supplies, has purchased over 16 million barrels of West Texas Intermediate (WTI) crude oil this year. The refinery’s operations reflect the availability and competitive pricing of US crude on the global market.
