Federal Gov’t, Oil Producers Agree On Sustainable Crude Supply To Local Refineries

The Federal Government and producers in Nigeria have agreed to work towards a sustainable supply of crude oil to local refineries under a market-determined pricing system.

LEADERSHIP understands that 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 Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), at a meeting called by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), agreed to adopt a framework that would be mutually beneficial with the aim of ensuring that local refineries are not strangulated due to high prices.

Chief Executive of the Commission, Engr. Gbenga Komolafe said the meeting focused on the status review of the framework for seamless operationalisation of domestic crude oil supply obligation template.

LEADERSHIP reports that those present at the meeting 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 and the Managing Director/Chief Executive of Total energies, Matthieu Bouyer.

Other include the Managing Director, Nigerian Agip Oil Company, Bolondi Fabrizio and the Chief Operating Officer of Seplat, Samson Ezugworie among other.

NUPRC said the meeting was part of its 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.

Komolafe also noted that President Bola 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 also 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.

As regulators, he said the NUPRC 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.”

He further 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.”