Regulators Push Crude Pricing Template For Domestic Refiners, Target $3–$4/b Cost Reduction

Regulators are working on a new crude pricing and supply template aimed at reducing feedstock costs for domestic refineries by $3-$4 per barrel by eliminating costly intermediaries, industry and government officials have said.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) are leading the review and have convened producers, refiners and other stakeholders in Lagos to agree on a framework for domestic crude deliveries.

“We are working on a template that will make it cheaper and simpler for local refiners to access Nigerian crude,” a senior NUPRC official said.

“The goal is to remove unnecessary middlemen and to reflect actual freight and handling costs in pricing, rather than inflated benchmarks that do not apply when crude is delivered directly.”

The proposals include allowing refiners to lift crude directly from production sites and applying discounts to reflect savings on freight and terminal handling costs embedded in Brent-linked prices.

Regulators said the changes could reduce feedstock costs for refiners, including the 650,000-barrel-per-day Dangote Refinery, by about $3-$4 per barrel.

National Publicity Secretary of the Crude Oil Refiners Association of Nigeria (CORAN), Eche Idoko, said the reforms were requested by inland refiners who had long complained about premiums arising from existing trading arrangements.

“We have been clear that the current structure often forces us to buy through trading arms of international oil companies, and that process introduces extra premiums,” Idoko said.

“If producers can deliver directly to refineries, and if the price reflects the real costs avoided, that is a win for both producers and refiners.”

The Dangote Petroleum Refinery and Petrochemicals has repeatedly called for commercially viable and consistent supplies of domestic crude.

Group Vice-President, Oil, Gas and Fertiliser, Dangote Industries, Devakumar Edwin, said the company supported the Domestic Crude Supply Obligation (DCSO) but had faced higher prices and limited direct access.

“Our position is straightforward: we will buy Nigerian crude if it is available in adequate volumes and at competitive market prices,” Edwin said.

“When cargoes are routed through intermediaries, additional premiums appear that undermine the economics of domestic refining and raise costs for Nigerian consumers.”

NUPRC data released on Monday showed that producer compliance with the DCSO had risen to more than 90 per cent in the latest quarter, from less than 43 per cent previously.

Industry stakeholders are expected to address technical issues, including crude-quality differences, pricing adjustments and settlement mechanisms, during the Lagos meeting.

“The meeting is meant to draft an acceptable volume and pricing template so that domestic refineries can plan and operate sustainably,” Idoko said.

“We want a transparent process that ensures timely delivery and commercial fairness.”

National president of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, welcomed the move and urged the Nigerian National Petroleum Company Limited (NNPC) to return state-owned refineries to full commercial operation.

“Multiple operational refineries are essential to promote healthy competition and energy security,” Gillis-Harry said.

“We support any measures that make feedstock available at sustainable prices and encourage investment in local refining.”

Similarly, the general secretary of the Petroleum Dealers Association of Nigeria (PEDAN), Ibrahim Yahaya, said the association supported sustainable feedstock arrangements that could help Nigeria become self-sufficient in refined products and export excess fuel.

Regulators and industry analysts said pricing, rather than physical availability, had become the main bottleneck in domestic crude transactions.

“The issue is not simply whether crude is offered under the DCSO, but whether it is offered on commercially competitive terms,” one analyst said.

Under the DCSO, producers are required to offer allocated crude volumes to local refiners on a willing-buyer, willing-seller basis. Refiners, however, said many cargoes were routed through international oil companies or third parties, increasing costs and complications.

One proposed solution would allow producers to deliver crude directly to nearby refineries and reconcile volumes later at export terminals, reducing transportation and logistics costs.

“If transport and handling costs are genuinely lower for direct lifts, the price must reflect that reality,” the NUPRC official said.

“This will make domestic refining more competitive and protect consumers from inflated product prices.”

Market participants cautioned that the arrangement would require clear rules on crude quality, pricing formulas and dispute resolution.

“You cannot simply change the delivery point without clear mechanisms to handle quality swaps and settlement,” a senior industry source said.

“Those technicalities are fixable, but they need to be worked through carefully.”

The reforms come as West African regulators explore deeper regional market integration.

NMDPRA chief executive, Rabiu Umar, said Nigeria’s growing refining capacity, led by the Dangote refinery, was strengthening the case for a West African pricing and trading hub.

“African markets should move from price-takers to credible centres of price discovery,” Umar said.

“But a regional hub will need pipelines, storage, marine logistics and digital trading systems to improve liquidity and transparency.”

Regulators expect feedback from the Lagos meeting to shape the final template. If adopted, the reforms could reduce feedstock premiums, improve the competitiveness of domestic refining and help stabilise local fuel supplies.

“We are not trying to disadvantage producers,” the NUPRC official said.

“We want a fair, transparent system that supports domestic refining, protects consumers, and sustains investment across the value chain.”