Yemisi Izuora
A possible crude supply shortage to domestic refineries has been envisaged by operators in the midstream and downstream sectors of Nigeria’s oil industry.
The fear was hipped by Aliko Dangote, who operates Africa’s biggest refinery with 650,000 barrels a day (bpd) capacity in Lagos being expanded to 1.4 million bpd.
Dangote, while speaking at the opening of the third Nigeria Oil Refining Summit (NORS) 2026, organised by Crude Oil Refinery Owners Association of Nigeria (CORAN), with the theme, “Refining for Value: Linking Upstream Supply to Downstream Demand.” said the group’s total refining capacity will reach 2.1 million barrels per day (bpd) across Africa with the upcoming 650,000bpd refinery (scalable to 700,000bpd) in Lamu, Kenya, and the existing 700 bpd in Nigeria, being expanded to 1.4 million bpd.
Represented by the group’s Chief Economist, Dr. Hassan Mahmud, Dangote said all was set for the ground-breaking of the Kenya’s Lamu new refinery, which is also 650,000 barrels to be scaled to 700,000 barrels. “So if you combine the existing 650,000 bpd refinery… with the extension, another 700,000 making it 1.4 and another 700,000 in the East African refinery, Dangote alone is doing 2.1 million barrels a day.”
Dangote, raised concerns the scale of that ambition had exposed a fundamental supply gap because with the current production, Nigeria’s crude supply alone could not feed the Dangote refinery alone.
“So the need for expanding the exploration of upstream side of the industry is extremely critical,” he said.
“The market is there and so we should explore the opportunities,” he added.
Dangote said building a competitive refining industry was not just about building plants. He said it required a full value chain from crude production to transportation, storage, refining, distribution and export.
He warned that weakness in any link affected the competitiveness of the whole.
But Dangote said the seeming supply challenges can be overcome if government ensures reliable and competitive access to crude, a truly competitive downstream market, stable and predictable policy, shared logistics infrastructure, and an export-oriented vision.
Dangote, however acknowledged progress under the Domestic Crude Supply Obligation (DCSO) provided for in the Petroleum Industry Act (PIA).
He cited data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which showed that about 53.7 million barrels were supplied to domestic refineries in Q2 2026, representing 97.4 per cent compliance, while total crude and condensate production reached about 1.7 million bpd as of June 2026, its highest in several years.
He added that domestic refinery receipts rose to about 683,000 bpd in August 2026.
Dangote said, “We must consolidate this progress. Nigeria should reach a point where a refinery located in Nigeria and ready to purchase crude on competitive commercial terms can reliably obtain appropriate crude without unnecessary uncertainties.
“This is not a call for subsidised crude. It is a call for predictability, transparency, and commercially workable arrangement between producers and refiners.”
He added that competition must be on a level playing field where imported and locally refined products compete under equivalent regulatory, quality, tax, and commercial regimes.
He said, “No refinery should survive simply because government protects it. Equally, no domestic refinery should be disadvantaged by a market structure that inadvertently makes import more attractive than local production.”
Also, speaking, the Chairman of Oil Producers Trade Section (OPTS) and Managing Director of TotalEnergies EP Nigeria Ltd, Mr. Matthieu Bouyer, said Nigeria’s oil and gas industry was in a genuinely encouraging period driven by sustained reform.
Bouyer, who was represented by Executive Director of OPTS, Mr. Gwueke Ajaifia, said PIA implementation, recent executive orders, and renewed licensing had revived offshore investment, unlocking over $10 billion in new upstream investment and a series of Final Investment Decisions (FIDs) over the past year.
According to Bouyer, domestic refining could provide a resilient route to market and reduce exposure to geopolitical and shipping risks, but only if the domestic crude market was commercially attractive to both sides, anchored on market-reflective pricing, payment certainty, and contract sanctity.
“Nigeria competes globally for upstream capital,” he said, calling for policy and fiscal stability, continued regulatory alignment between NUPRC and Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and preservation of economics needed to sustain upstream investment.
He stated that President Bola Tinubu’s target of three million bpd by 2030 was ambitious and required developing eight Floating Production, Storage and Offloading (FPSO) to achieve that.
Bouyer stated, “What does three million barrels per day mean from where we are today? It means Nigeria has been able to develop eight FPSOs between now and 2030.”
In his speech, the Chairman of Independent Petroleum Producers Group (IPPG) and Managing Director of Aradel Holdings, Mr. Adegbite Falade, warned that Nigeria risked a supply squeeze as domestic refining demand surged towards 1.5 million barrels per day, almost matching current national output of 1.68 million bpd.
He said Nigeria could feed its refineries geologically and technically, but not yet commercially and logistically.
Falade said the core issue was narrow margins, saying if refineries need over 1.5 million bpd while production stays around 1.6 million bpd, there is little room left for export commitments, government revenue requirements, crude-backed financing, Joint Venture offtake, Organisation of Petroleum Exporting Countries OPEC) obligations, planned and unplanned outages, grade mismatches, and pipeline disruptions.
The problem, he said, was not reserves, stating that NUPRC data puts crude and condensate reserves at 37.01 billion barrels and gas at 215.19 trillion cubic feet (TCF) as of January 2026.
Falade, noted that the problem is converting reserves into production and production into secure, bankable supply.
Falade identified four structural gaps facing the sector, including declining production base, insecure and outdated evacuation infrastructure, absence of a true domestic crude market, and lack of aggregation and blending systems to match the right crude grade to the right refinery.
He said the issue can be resolved through production expansion, incentivise exploration, accelerate development, enable marginal fields and improve access to upstream capital to create more barrels rather than reallocate scarce ones.
The IPPG Chairman pointed to the need to protect and modernise evacuation, sustain the fight against theft and sabotage, while building dedicated crude corridors, secure pipelines, adequate terminal capacity, storage and marine logistics.
He also supported Dangote’s call to build a competitive domestic crude market.
Falade stated, “Move from annual allocations to rolling supply planning and bankable contracts, with aggregation from multiple producers, grade blending, transparent swaps and substitutions, and efficient terminal delivery.
He pushed that investors in the refinery space be highly incentivized so that Nigeria remains a regional refining and petrochemical hub to capture full value.
Chairman of CORAN and OPAC Refineries, Mr. Momoh Oyarekhua, also noted in his opening statement that domestic refineries still faced difficulties accessing crude on commercially viable terms, while fuel imports persisted and capacity remained underutilised.
Oyarekhua proposed full institutionalisation of Naira-for-Crude with transparent eligibility, including modular refineries, a domestic crude pricing template reflecting quality and logistics, strengthened DCSO enforcement under Section 109 of the PIA, proximity-based crude swaps, progressive reduction of product imports to shortfalls, and a Refinery Development Financing Framework.
He also called for shared pipelines and storage infrastructure, strategic product reserves, fiscal incentives for conversion units, and a clear national refining roadmap.
The stakeholders said the next phase required partnership, predictable regulation, and bankable contracts to transform Nigerian crude into Nigerian prosperity and make the country Africa’s leading refining hub