Honour Domestic Crude Obligations Or Risk Sanctions, NUPRC Warns Oil Producers

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has issued a stern warning to oil producers, emphasising the necessity of honouring domestic crude supply obligations or facing sanctions.

The directive comes as part of the commission’s efforts to ensure a consistent supply of crude oil to local refineries, which are crucial for the nation’s energy security and economic stability.

The NUPRC warned that it will henceforth deny export permits for crude oil cargoes intended for domestic refining, if oil companies do not fulfill their domestic crude obligations.

The commission insisted that any changes to cargoes designated for domestic refining must receive express approval from the commission chief executive.

In a letter dated February 2, 2025, addressed to exploration and production companies and their equity partners, and seen by LEADERSHIP, the commission chief executive (CCE), Gbenga Komolafe, reiterated that diverting crude oil meant for local refineries violates the law.

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At a meeting last weekend, attended by more than 50 critical industry players, both the refiners and producers blamed each other for the inconsistencies in the implementation of the Domestic Crude Supply Obligation (DCSO) policy. They, however, agreed that the regulator has put in place appropriate measures for effective implementation.

While the refiners claimed that producers were not meeting supply terms and preferred to sell their crude outside, forcing them to look elsewhere for feedstock, the producers countered that refiners hardly met commercial and operational terms, forcing them to explore other markets elsewhere to avoid unnecessary operational bottlenecks.

The regulator cautioned against any further breaches from either party. It advised refiners to adhere to international best practices in procurement and operational matters and reminded producers not to vary the conditions stated in the DCSO policy without obtaining express permission from the CCE before selling crude outside the agreed framework. This is to avoid abuse.

Engr. Komolafe referenced Section 109 of the Petroleum Industry Act (PIA) 2021, which aims to ensure a stable supply of crude oil to domestic refineries and strengthen the nation’s energy security, and stated that NUPRC will henceforth strictly enforce the policy regarding implementation and defaults by oil companies.

He stated that significant regulatory actions have already been taken by the Commission, in line with the enabling laws, to enforce compliance with the Domestic Crude Supply Obligation (DCSO). These actions include the development and signing of the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023, as well as the creation of the DCSO framework and procedure guide for implementation.

Also, during monthly meetings with upstream operators, NUPRC monitors compliance with production metrics that provide insight into available crude volumes two months in advance, facilitating discussions regarding supply commitments to refineries.

The CCE stressed that it will no longer tolerate violations of the laws governing domestic crude supplies to local refineries, as such actions have implications for the country’s energy security. “Kindly note that the diversion of crude cargo designated for domestic refineries is a contravention of the law and the Commission will henceforth disallow export permits for designated crude cargos for domestic refining,” he warned.