Yemisi Izuora
Nigerian Government has in a stern message said it would not allow further crude exports from producers when they have not obliged their local supply commitments.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has therefore vowed to carry out sanctions against crude oil producers in Nigeria who routinely flout the Domestic Crude Supply Obligation (DCSO) to local refineries as provided for by the Petroleum Industry Act (PIA).
The NUPRC warned that henceforth it would deny export permits for crude oil cargoes intended for domestic refining, if oil companies do not fulfill their domestic crude obligations.
The message was contained in a letter dated February 2, 2025, addressed to exploration and production companies and their equity partners.
In the official communication with the oil producers, the Commission’s Chief Executive, Gbenga Komolafe, reiterated that diverting crude oil meant for local refineries violates the law and would be met with sanctions.
Since Nigeria resumed local refining of petroleum products, there have been accusations by the refineries, both the major one owned by Africa’s richest man, Aliko Dangote as well as the modular refineries, of insufficient or outright non-supply of feedstock.
Before now, aside from having a series of meetings with all the parties concerned, the NUPRC had come up with regulations and a framework to ensure that local refineries get crude oil supply.
However, besides the usual disagreement over the currency of transactions, some oil firms prefer to sell the much sought-after Nigerian oil blend for a premium abroad. The issue of insufficient local crude oil production also persists, with a number of the oil producers having committed future production to their customers abroad.
But the commission insisted that any changes to cargoes designated for domestic refining must receive express approval from its chief executive, going forward.
The NUPRC also convened a meeting at the weekend, attended by more than 50 critical industry players, to sort out any differences hindering the supply of feedstock to Nigerian refineries.
At the meeting, both the refiners and producers blamed each other for the inconsistencies in the implementation of the domestic crude supply obligation policy, even though they agreed that the regulator had put in place appropriate measures for effective implementation.
“While the refiners claimed that producers were not meeting supply terms and preferred to sell their crude outside, forcing them to look elsewhere for feedstock, the producers countered that refiners hardly met commercial and operational terms, forcing them to explore other markets elsewhere to avoid unnecessary operational bottlenecks.
“The regulator cautioned against any further breaches from either party. It advised refiners to adhere to international best practices in procurement and operational matters and 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. This is to avoid abuse,” the NUPRC pointed out.
Komolafe referenced Section 109 of the PIA, 2021, which aims to ensure a stable supply of crude oil to domestic refineries and strengthen the nation’s energy security.
He stated that NUPRC would henceforth strictly enforce the policy regarding implementation and defaults by oil companies, adding that significant regulatory actions had already been taken by the commission, in line with the enabling laws, to enforce compliance with the DCSO.
These actions, Komolafe reiterated, included the 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.
Also, during monthly meetings with upstream operators, NUPRC said it monitors compliance with production metrics that provide insight into available crude volumes two months in advance, facilitating discussions regarding supply commitments to refineries.
Komolafe stressed that the NUPRC would no longer tolerate violations of the laws governing domestic crude supplies to local refineries, as such actions have implications for the country’s energy security.
“Kindly note that the diversion of crude cargo designated for domestic refineries is a contravention of the law and the commission will henceforth disallow export permits for designated crude cargos for domestic refining,” he cautioned.