The federal government, through the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), has implemented new restrictions mandating oil producers to sell crude oil to local refineries in an effort to lessen the country’s reliance on imported refined goods.
The new restrictions require all oil corporations in Nigeria to supply crude to domestic refineries that cannot obtain it domestically. Only after meeting these domestic supply agreements are producers allowed to export crude.
When crude supply agreements cannot be reached, the NUPRC will act as a go-between for local refiners and producers, assisting in the formation of a sales purchase agreement based on the willing-buyer, willing-seller model.
The regulations specify that payments for crude to domestic refiners can be made in dollars, naira, or a combination of the two.
The regulator intends to implement the Domestic Crude Oil Supply Obligation scheme in the second part of the year. The particular amount of crude required by each refinery has yet to be determined.
In January, the NUPRC directed oil producers in the country to transfer around 483,000 barrels per day (bpd) to local refineries, with the Dangote plant, which has a capacity of 650,000 barrels, receiving the lion’s share (325,000 bpd).
The Warri and Port-Harcourt refineries are also expected to gain from the crude oil supply, with 75,000 and 54,000 barrels of crude oil per day, respectively. Additionally, smaller refineries like Waltersmith, OPAC, and Niger Delta Petroleum Refinery, among others, are expected to receive up to 10,000 barrels per day.
The Domestic Crude Supply Obligation guidelines (DCSO) programme intends to limit the country’s petroleum product imports.
The Petroleum Industry Act (PIA), which was passed in 2021, has a provision requiring Nigerian oil producers to allocate a portion of their crude oil to domestic refineries to minimise shortages.