Oil Producers Divert 500,000bpd Local Refineries' Crude Oil Allocation

The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has raised serious concerns, alleging that oil producers are diverting 500,000 barrels per day (bpd) of crude oil intended for local refineries.

This claim was made public on Wednesday, amid ongoing discussions about the challenges facing Nigeria’s refining sector.

The association’s publicity secretary, Joseph Obele, who made this known, emphasised that the diversion of these crude allocations has led to the abandonment of many refineries, which are struggling to operate due to insufficient feedstock.

Obele accused oil producers of prioritising quick foreign exchange gains over compliance with domestic supply obligations.

PETROAN commended the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for recently banning the export of crude oil allocated for domestic refining, a move they believe will enhance local refining capabilities and reduce the nation’s reliance on imported petroleum products.

He stated, “Approximately 500,000 barrels of crude oil per day are allocated for domestic refining, but these volumes often find their way to the international market”.

This situation has prompted calls for immediate action against both producers and companies that fail to adhere to the new regulations.

The issue has sparked a heated debate among industry stakeholders. While oil producers argue that local refineries often do not meet commercial terms, refiners counter that producers are neglecting their supply commitments in favor of international markets. This ongoing blame game complicates efforts to stabilise local crude supply and improve refinery operations.

PETROAN’s national president, Billy Gillis-Harry, urged swift enforcement of the export ban to ensure that local refineries receive their fair share of crude oil.

He expressed optimism that this policy could lead to a more self-sufficient refining sector in Nigeria, ultimately benefiting consumers through reduced prices and improved product availability.

Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had issued a directive to oil producers mandating strict compliance with domestic crude supply obligations. This move aims to ensure that local refineries receive sufficient crude oil, particularly in light of the anticipated operations of the Dangote Refinery, which is expected to process 550,000 barrels per day.

The NUPRC said oil companies that fail to meet their domestic supply commitments will face denial of export permits for crude oil cargoes intended for local refining. This is a significant enforcement measure to ensure compliance with the Petroleum Industry Act (PIA) 202114.

Any changes to cargoes designated for domestic refineries must be approved by the NUPRC chief executive, Gbenga Komolafe. The commission emphasised that diverting crude meant for local refineries is a violation of the law.

Local refiners have expressed difficulties in securing adequate crude supplies, leading to concerns about Nigeria’s energy self-sufficiency. The NUPRC’s actions are aimed at addressing these challenges and ensuring a reliable supply chain for domestic refineries.

The NUPRC said it plans to monitor compliance through regular meetings with upstream operators, focusing on production metrics and available crude volumes to facilitate discussions regarding supply commitments.