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Crude Oil Demand From Local Refineries Rises To 597,700bpd

by Nse Anthony - Uko
1 year ago
in Cover Stories
crude oil
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Domestic refineries in the country, mainly the 650,000 barrels-per-day capacity Dangote Refinery, have raised their crude oil requirements from Nigeria’s oil-producing companies to 597,000 for the second half of this year.

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This is according to a statement from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and reported by Reuters on Monday.

According to the report, Nigeria’s refineries have increased their domestic crude requirements for the second half of 2024 to 597,700 barrels per day, up from 483,000 barrels per day in the first half.
NUPRC also confirmed that the oil companies were only able to provide 177,777 bpd to the refineries in the first six months of the year, way below the requirements of the refineries.

The increasing crude requirements of local refineries, coupled with the challenges oil producers face in meeting demand, have created tensions between the Dangote Refinery and the regulator.

According to the NURPC, eight refineries are expected to commence operations in August, with a combined refining capacity of 864,500 bpd. This would require oil producers to supply more than half of that amount.

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A total of 52 oil producers, including major players such as TotalEnergies, Chevron, Shell and ExxonMobil, are expected to supply the necessary crude, primarily through their joint venture operations with the Nigerian National Petroleum Corporation (NNPC) Limited.

The Dangote Refinery had earlier accused the NUPRC of failing to enforce the Petroleum Industry Act (PIA) regarding the domestic crude supply obligations to local refineries.

In a statement released on Friday, the refinery’s spokesperson, Anthony Chiejina, stated that NUPRC had only facilitated the sale of a single cargo between the refinery and crude oil producers.
Chiejina further noted that the regulatory body cited the “sanctity of a contract” as the reason for its inability to enforce its own Act.

“Aside from the term-supply we bilaterally negotiated with NNPC, so far NUPRC has only facilitated the purchase of one crude cargo from a domestic producer. The rest of the cargoes we have processed were purchased from international traders.

“All we are asking for is for refineries in Nigeria to buy crude directly from the companies that produce it in Nigeria rather than from international middlemen.

“Unfortunately, the NUPRC has effectively admitted in their statement that they will be unable to enforce the domestic crude supply obligation as specified in the PIA citing ‘sanctity of contracts’ as an excuse,” the statement read.

LEADERSHIP recalls that the NUPRC had rejected insinuations by the management of the Dangote Refinery that it was failing in its duty as the upstream regulator to effectively enforce the Domestic Crude Supply Obligation (DCSO).

The commission said, as part of its commitment to ensure the enforcement of section 109 of the Petroleum Industry Act, 2021, which provides, among others, the domestic supply of crude to local refineries on a ‘willing buyer, willing seller’ basis, it has ensured that nine refineries were supplied crude despite low oil production.”

In all, the NUPRC said it had facilitated over 32 million barrels of crude oil supply to Dangote Refinery and other local producers in the first half of 2024.

A breakdown, according to the NUPRC, showed that nine refineries have benefitted from the 32,088,122 barrels of crude, with Dangote alone enjoying 29,047,098 barrels out of the total supply between January and June 2024.

“The Warri Refinery received 949,670 barrels; NDPR-NDPR Refinery got 823,395 barrels of crude; the Port Harcourt Refinery received 471,123 barrels; Seplat-WPSOL Refinery was allocated 419,541 barrels while Waltersmith-WSPOL Refinery got 296,353 barrels.

“Other beneficiaries were Edo Refinery which got 58,504 barrels of crude and Du-port Refinery that got supplied 22,438 barrels of crude,” the NUPRC added.

A further breakdown of refining requirements in Nigeria indicated that Aradel Refineries Ltd in Ogbele, Rivers State, has 11,000 bpd; OPAC Refineries, Kwale, Delta State, has a capacity of 10,000 bpd, while Waltersmith Refinery in Ohaji-Egbema, Imo State, is 50, 000 bpd.

In addition, Edo Refinery & Petrochemical Company Ltd, has a capacity of 1,000 bpd; Dangote Refinery Ibeju-Lekki, Lagos State, has 650,000 bpd capacity; (Old) Port-Harcourt Refinery, Rivers State has a capacity of 54,000 bpd while that of Warri Refinery, Delta State, is 75,000 bpd.

“Much as the NUPRC has tried to ensure the enforcement of the provisions of Section 109 of PIA, 2021, the producers have equally responded to the regulator, saying that, conventionally, oil production is funded through pre-export financing.

“This means that crude has been pledged for funding and the whole transaction is guided by the ‘Doctrine of the Sanctity of Contracts’. The parties already agreed that the licensees would pay the cost of the development and they explained to the commission that most of the funding was provided by traders at a mutually agreed price.

“Aside that, producers equally reported some operational challenges on the part of refiners, in which the NUPRC has consistently defended local refiners.

“In fulfilment of the NUPRC mandate to enforce section 109 of the PIA, the NUPRC has ensured that international standard practices are followed in a manner that will not scare investors and further worsen the already weak revenues from crude oil,” the commission said.

However, the NUPRC in the pursuit of its mandate, said if it becomes necessary for the NUPRC to withdraw licences, the commission will do so, but it will not resort to the ‘presumptuous and arbitrary’ withdrawal of licences because of the sanctity of contracts.

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