As FG Directs Producers To Honour Domestic Crude Obligations Local Refineries

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has directed producers and refiners to provide the commission with cargo price quotes on crude supply and delivery for effective monitoring and regulation of transactions among parties.

This is to ensure that oil producing companies in the country adhere to the provisions of the Petroleum Industry Act (PIA) 2021 concerning the supply of crude oil to domestic refineries.

Commission chief executive, NUPRC, Engr. Gbenga Komolafe gave this directive at a crucial meeting between the NUPRC and Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI).

This is coming few weeks after Dangote Refinery alleged sabotage by International Oil Companies (IOCs) to starve it of crude stock.

The focus of the meeting held at the instance of the Commission chief executive, Engr. Gbenga Komolafe was on the status review of the Framework for Seamless Operationalisation of Domestic Crude Oil Supply Obligation Template, which ensures supply of feedstock to domestic refiners, including Dangote Refinery and others.

“We need to have the price quotes monthly,”Komolafe declared at the meeting, a statement from the commission indicated.

Recall that issues around pricing, supply and delivery of crude oil have generated claims and counter claims between the producers in Nigeria and refiners, especially Dangote refinery, which recently accused producers of sabotage.

Giving an outcome of the.meeting called by NUPRC to address all issues around pricing, supply and delivery of crude, the Commission said in a statement that the government and crude oil producers in Nigeria “have agreed to work toward a sustainable supply of crude oil to local refineries under a market-determined pricing system.”

The aim is to ensure that while the operators do business optimally, the refineries are not starved of feedstock.

The producers under the umbrella of the OPTS at the meeting agreed to concede to a framework that would be mutually beneficial with the aim of ensuring that local refineries are not strangulated due to off-the-curve prices.

The focus of the meeting held at the instance of the Commission Chief Executive was on the status review of the Framework for Seamless Operationalisation of Domestic Crude Oil Supply Obligation Template. It was part of efforts to effectively implement key sections of the Petroleum Industry Act (PIA) 2021, especially the issue of pricing and crude supply to the domestic refineries.

Engr. Komolafe said President Bola Ahmed Tinubu is fully committed to providing a level playing ground for producers and refiners to do business in the industry. He expressed the need for a rule of engagement to ensure that the pricing model from the oil producers does not hinder the domestic refineries. He directed producers and refiners to provide the NUPRC with cargo price quotes on crude supply and delivery for effective monitoring and regulation of transactions among parties. “We need to have the price quotes monthly,” he directed.

The CCE pointed out a convergence between the Domestic Crude Oil Supply Obligation (DCOSO) and the nation’s energy security, indicating that his team is re-engineering its regulatory processes to address the challenges. “We allow all our processes to be transparent. While the federal government targets the implementation of the regulation, all parties must submit to the rules of engagement as a guide for operation,” he said.

The regulator, he said, is committed to driving the willing buyer/willing seller provision. “We have to discuss pricing, especially as parties have committed to respecting their domestic crude oil obligation. As the regulator, we don’t want the upstream sector to be operated sub-optimally through cost under-recovery. So, the regulator is very alive to that. In crude pricing we will never allow price strangulation to disincentivise our domestic refining capacity optimisation. The regulator does not support cost under-recovery in the upstream sector, and we will continue to work to ensure that crude supply profiteering as a negative factor that can strangulate our domestic refining capacity optimisation is disallowed.”

The CCE stated that “NUPRC is committed to attracting the needed investments to boost upstream development and optimisation of our hydrocarbon resources just as we want sustainability of domestic energy supply in the midstream and downstream sector.”

LEADERSHIP reports that those present at the meeting which held on Monday included, the managing director of Shell Petroleum Development Company of Nigeria Ltd (SPDC) and country chair, Shell Companies in Nigeria, Osagie Okunbor; managing director of Chevron, Jim Swartz ; managing director/chief executive of Total energies, Matthieu Bouyer; managing director, Nigerian Agip Oil Company, Bolondi Fabrizio;; chief operating officer of Seplat, Samson Ezugworie among other.