The Federal Government has banned the export of crude oil meant to meet the needs of domestic refineries in the country, apparently 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, Vanguard 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.
The commission said the initiative aligns with Nigeria’s commitment to bolstering its domestic refining capacity and ensuring the sustainability of its oil industry.
It stated: “The forecasted daily crude requirement for Refineries which is Seven Hundred and Seventy Thousand, Five Hundred barrels (770,500 Bopd), is about 37% of the forecasted first half 2025 average daily production of Two Million, Sixty-Six Thousand, Nine Hundred and Forty Barrels (2,066,940 Bopd).
The crude oil will come from some International Oil Companies, IoCs, and independents, including Shell, Chevron and Seplat Energy.
The commission, which noted that refineries had different crude forecast requirements, put the requirements of Dangote Petroleum Refinery and OPAC refinery at 550,000 bpd and 5,000 bpd, respectively.
WalterSmith Refinery, Duport Midstream, Edo Refinery and Aradel Refinery at 4,500 bpd, 2,000 bpd, 1,000 bpd and 7,000 bpd, respectively. Also, Port Harcourt refinery, Warri Refinery and Kaduna Refinery need 60,000 bpd, 75,000 bpd and 66,000 bpd, respectively.
Meanwhile, Nigeria’s daily average oil production rose by 7.38 per cent year-on-year in December 2024 to 1.667 million barrels per day, mbpd, including condensate from 1.552 mbpd recorded over corresponding period in 2023, indicating that the nation’s crude oil supply situation has improved.
In its latest oil production data, NUPRC indicated that on a month-on-month basis, daily average oil output in December 2024, declined by 1.35 per cent from 1.690 million barrels per day recorded in November, 2024, to 1.667mbpd.
Data from the commission also indicated that daily peak oil production in December 2024 was 1.79mbpd while the lowest daily production was 1.57mbpd.
Cumulatively, oil output in December 2024, was 51.69 million barrels, a marginal increase of 1.9 per cent when compared to 50.71 million barrels produced in November 2024.
Further analysis of the data showed that the highest oil output in December 2024 was recorded at Forcados Terminal at 8.49 million barrels, followed by Bonny Terminal, 7.78 million barrels and Qua Iboe, 4.15 million barrels.
The data showed without condensate, daily oil production was 1.484 million, indicating that Nigeria, again, failed to meet its oil production quota of 1.5mbpd allotted her by the Organization of Petroleum Exporting Countries, OPEC.
The December 2024 average daily oil output also means that Nigeria failed to meet the 1.7mbpd benchmark set for the 2024 budget all through the year.
NUPRC data on daily average production showed that oil production including condensate in January 2024 was 1.64mbpd; February, 1.53mbpd; March, 1.44mbpd; April, 1.45mbpd; May, 1.47mbpd; June, 1.50mbpd; July, 1.53mbpd; August, 1.57mbpd; September, 1.54mbpd, October, 1.54mbpd; November, 1.69mbpd; and December, 1.67mbpd.
Reacting to the report on insufficient crude oil supply to local refineries, the Chief Corporate Communications Officer, NNPC Limited, Mr. Femi Soneye, said NNPC is now an independent player in the oil and gas industry.
In a note to Vanguard, Soneye stated: “The Federal Government has implemented policies to ensure that local refineries receive crude oil supplies to enhance domestic refining capacity and reduce dependence on imported petroleum products. Under the Petroleum Industry Act, PIA, of 2021, oil producers are mandated to allocate specific volumes of crude oil to domestic refineries before exporting the remainder.
“These policies reflect the government’s commitment to strengthening national energy security by promoting local refining and reducing reliance on imported petroleum products. NNPC is a player in the market and we have continually stressed these facts”. – Vanguard.
