Domestic refiners in Nigeria, including smaller modular refineries, are facing a serious problem: they can’t access crude oil to refine into fuel, even though the country’s oil production has increased to over 1.4 million barrels per day. This situation has prompted refinery owners to urge the Federal Government to ensure that local oil suppliers are prioritized to supply them crude oil before it’s sent overseas for export.
Because of this lack of access, many local refineries struggle to operate at full capacity. This limitation prevents them from contributing significantly to the energy sector. The Crude Oil Refinery-owners Association of Nigeria (CORAN) has confirmed these difficulties, stating that refinery owners are now being forced to import crude oil simply to stay in business and try to increase their production.
Eche Idoko, who is the Publicity Secretary of CORAN, mentioned in an interview that local oil producers within the supply chain have felt neglected. For several months, they have not received any allotments of crude oil under a specific regulatory framework known as the Domestic Crude Oil Supply Obligation (DCSO). This framework is supposed to ensure that domestic refineries receive a guaranteed supply of crude oil for processing.
Unfortunately, instead of supplying local refineries, about 500,000 barrels of crude oil each day are being exported instead of being used domestically. Oil producers and traders seem to prefer making faster profits from the international market in foreign currency rather than fulfilling their obligations to provide crude oil to local refineries.
In response to this ongoing challenge, the Federal Government has taken steps to address the issue. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has implemented a ban on exporting crude oil that is meant for local refining. The Chief Executive of NUPRC, Gbenga Komolafe, emphasized that diverting crude oil away from local refineries is against the law and warned that export permits would be denied for crude oil that should be used domestically.
However, oil producers believe that as long as the domestic crude market remains unregulated, local refiners may continue to struggle. Many refinery owners have had to make private arrangements to secure crude oil, often leading to difficulties and forcing them to operate below their full capacity.
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Idoko expressed hope that the new regulations from the NUPRC will be effectively implemented, stating that the industry has largely depended on private deals to obtain necessary supplies. He mentioned that while some government initiatives, like reducing licensing costs, have been helpful, more support for local refiners is essential.
Despite Nigeria’s increased oil production, local refiners are still struggling to get the supplies they need, hindering the growth and self-sufficiency of the domestic oil industry. Members of CORAN have called on President Bola Tinubu and his economic team to provide more support to local refineries, particularly modular operations.
According to a recent report from the NUPRC, major refineries in Nigeria, including the Dangote Petroleum Refinery and several others, will need a substantial amount of crude oil (approximately 770,500 barrels per day) for processing in the first half of 2025. These refineries include small to mid-sized facilities in various states across the country. The report stated that this allocation is important to ensure the domestic refineries can run effectively and contribute to local fuel needs.
The NUPRC aims to meet this target and has introduced a project to significantly boost crude production for both local use and export.
Meanwhile, the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has highlighted that oil producers are still diverting about 500,000 barrels of crude oil daily that should go to local refineries and has praised the NUPRC for its ban on these exports. This action is expected to help increase local refining capacity, reduce the need to import refined fuel, and lessen reliance on foreign currency.
Despite reaching out for comments, oil producers have not been willing to discuss the matter publicly.
