The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has vowed to wield the big stick 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).
This is just as the federal government expects to hit 2.7 million barrels per day of crude oil by 2027, mostly condensate. Olu Verheijen, the Special Adviser on Energy to President Bola Tinubu disclosed this to Bloomberg
Specifically, 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.
A statement in Abuja on Monday noted that this 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.
According to the statement, 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.
The statement disclosed that 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.
Meanwhile, the federal government expects to hit 2.7 million barrels per day of crude oil by 2027, mostly condensate, Verheijen has disclosed.
The production of condensate, a lighter more volatile hydrocarbon, rather than just crude, would allow Nigeria to keep its Organisation of Petroleum Exporting Countries (OPEC) quota of 1.5 million barrels of crude, Verheijen pointed out.
Improvements in security around oil production and transportation sites is the main driver behind the rising production, she added, noting that Nigeria was on course to demonstrate capacity for higher output.
“The OPEC quota does not include condensate. The target we’ve set for ourselves is a combination of condensate and crude,” she said in an interview at an energy conference in Dar es Salaam, Tanzania recently.
“The idea is to try and demonstrate the capacity for a higher quota as required,” Verheijen added.
Nigeria’s rising production, from as low as 1.1 million barrels per day in 2022, comes as the country tries to bolster income to deal with a myriad of economic challenges ranging from widespread poverty to dilapidated infrastructure. In December it produced 1.67 million barrels per day, of which 1.48 million barrels were crude, the report added.
The West African nation is also on course to become a net exporter of oil products as a refinery owned by billionaire Aliko Dangote ramps up production, Verheijen added.
“It’s an ambitious push,” she said. “But it’s one to aim for.” The removal of fuel subsidies could also foster further investment in refineries, she said.
“What that has done is allow the downstream, mainstream downstream of that sector to now become commercially viable for the first time in decades,” she said. “Investments in refineries now make sense when they didn’t before,” the presidential adviser stressed.
Nigeria is proposing to produce 2 million barrels of crude oil this year alone, a level it has not reached for more than five years. It intends to achieve this by reducing pipeline vandalism, curbing oil theft and revamping dormant oil wells.
In the meantime, OPEC on Monday at its 58th conference, agreed to keep its policy of gradually raising oil output from April unchanged.
It also removed the US government’s Energy Information Administration (EIA) from the sources used to monitor its production and adherence to supply pacts.
An online meeting of the OPEC+ group called the Joint Ministerial Monitoring Committee also changed the list of consultants and other firms OPEC+ uses to monitor its production, known as secondary sources.
The OPEC Secretariat replaced Rystad Energy and the with Kpler, OilX, and ESAI, as part of the secondary sources used to assess the crude oil production and conformity.
OPEC+ is cutting output by 5.85 million barrels per day (bpd), equal to about 5.7 percent of global supply, as agreed in a series of steps from 2022.
“The JMMC reviewed the crude oil production data for the months of November and December 2024 and noted the high overall conformity for OPEC and non-OPEC countries participating in the Declaration of Cooperation (DoC). The improved conformity further reaffirms the DoC countries’ shared objectives of unity and cohesion.
“The meeting also welcomed renewed pledges by the overproducing countries to achieve full conformity and to resubmit their updated compensation schedules to the OPEC Secretariat for the overproduced volumes, for the period since Jan 2024, before the end of Feb 2025, as agreed in the 52nd Meeting of the Joint Ministerial Monitoring Committee (JMMC).
“The committee emphasised the critical importance of achieving full conformity and compensation, and reaffirmed that they will continue to monitor adherence to the production adjustments agreed upon at the 38th OPEC and non-OPEC Ministerial Meeting (ONOMM) held on 5 December 2024.
“The committee will also continue to monitor the additional voluntary production adjustments announced by some participating OPEC and non-OPEC countries as agreed upon in the 52nd JMMC held on 1 February 2024.
“The members of the JMMC reaffirmed their commitment to the DoC which extends to the end of 2026 as decided at the 38th OPEC and non-OPEC Ministerial Meeting (ONOMM) on 5 December 2024.
“Moreover, the members of the JMMC who participated in the additional voluntary production adjustments plan announced on 5 December 2024 reaffirmed their commitment noting that these additional voluntary production adjustments have ensured the stability of the oil market,” the statement added.
