International Oil Companies (IOCs) operating in Nigeria continue to bypass direct crude supply to local refineries, even as the country grapples with an estimated 60 million barrels of stranded crude oil.
This ongoing disconnect further complicates Nigeria’s efforts to scale up domestic refining and maximise oil revenues.
LEADERSHIP investigations reveal that more than 60 million barrels of Nigerian crude are reportedly stranded and unsold, floating on the high seas, as IOCs continue to sidestep local refineries in contravention of national legislation mandating domestic crude supply.
Documents obtained by this publication indicate that despite binding provisions under Nigeria’s Petroleum Industry Act (PIA), several IOCs persist in prioritising foreign oil traders over domestic refinery operators — a practice analysts describe as both exploitative and detrimental to the country’s energy security.
Under Sections 8(c) and 109 of the PIA, the Domestic Crude Supply Obligations (DCSO) mandate producers to sell crude oil to Nigerian refineries to ensure sufficient feedstock for domestic refining. However, IOCs have been accused of flouting this provision by selling to foreign traders — primarily in the Far East, Mediterranean region, and Southern Africa — who then resell the same crude to Nigeria at a premium of $5 to $6 per barrel above global benchmarks.
This has effectively priced local refineries out of their own market.
“IOCs offer crude to local refineries at significantly higher premiums than what they charge in other international markets. This is nothing but a coordinated effort to stifle the survival of Nigerian refineries, which are seen as competition to international refineries owned by some of these IOCs,” said Bimbo Oyarinu, a public affairs analyst.
“Rather than supply local refineries desperate for crude, these IOCs prefer to sell to foreign traders who add a margin and eventually bring the same crude back to Nigeria — at a much higher cost.”
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the body responsible for enforcing the PIA, has come under fire for failing to ensure compliance. While the Commission has repeatedly issued warnings to producers, critics say enforcement has been largely symbolic.
In a letter dated 2 February 2025, NUPRC Chief Executive Gbenga Komolafe warned oil companies that crude designated for domestic refining must not be exported.
“The diversion of crude cargo designated for domestic refineries is a contravention of the law,” Komolafe wrote. “The Commission will henceforth disallow export permits for such cargoes.”
Despite this, sources within the oil sector say the practice has continued unchecked, raising questions over the regulator’s capacity or willingness to impose effective sanctions.
They allege that the Commission is more concerned with pursuing backroom deals than upholding the law.
“The sad reality is that these IOCs continue to exploit the system with little or no regulatory consequences,” said a senior industry analyst, who requested anonymity.
“Local refiners are bidding, but they’re being ignored. Instead, cargoes are being sent thousands of miles away only to return later. It’s not only inefficient — it’s exploitative. And the NUPRC is complicit.”
Nigeria’s refining sector has recently witnessed a surge in investment, with modular and mega-refineries — including the Dangote Petroleum Refinery — aiming to reduce the country’s dependency on imported fuel. However, many of these facilities are unable to source local crude, threatening to derail billions of dollars in investment.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) has repeatedly criticised the regulatory regime for failing to allocate sufficient crude to local refineries. The association maintains that preference is still given to issuing fuel import licences rather than supporting domestic refining.
CORAN’s National Publicity Secretary, Eche Idoko, recently disclosed that crude supply shortages have stalled the progress of at least seven refineries.
“The major challenge is the availability of crude,” Idoko said. “Until recently, Nigeria wasn’t even meeting its OPEC production quota. For refineries to reach the Final Investment Decision (FID) stage, they need guaranteed feedstock. The current situation isn’t helping our case.”
He added that refineries such as the Edo Refinery, which plans to expand to 30,000 barrels per day, are now exploring supply options from U.S.-based producers. Only a few, like the Walter Smith Refinery and Aradel Energy — which operate using their own marginal fields — are able to refine intermittently.
“Other modular refineries haven’t refined a single litre in the last six to eight months,” Idoko lamented.
In a bitter twist, Nigerian refineries are now being forced to import crude oil just to remain operational. According to a report by The Punch, the Dangote Petroleum Refinery and other modular plants could spend up to $8.56 billion importing approximately 122.4 million barrels of crude over the next six months.
That amounts to an import bill of roughly $1.43 billion per month — a staggering cost for a country that holds some of the largest oil reserves in Africa.
Dangote’s refinery has already sourced crude from countries such as the United States, Angola, and Algeria, as local supply remains insufficient.
As Nigeria battles foreign exchange shortages, rising inflation, and a sluggish economic recovery, industry stakeholders insist the government must act urgently.
While NUPRC’s recent threats may hint at a shift in tone, many in the sector argue that action—not rhetoric—is needed.
“We’re sitting on a wealth of resources, yet we’re paying others to use them,” Oyarinu said. “That’s an economic paradox Nigeria can no longer afford.”
In an interview with LEADERSHIP on Tuesday, energy expert Dan Kunle explained that many cargoes are floating on the high seas due to the recent drop in global oil prices, as there now exist disagreements among crude sellers and buyers on price.
“Unfortunately, when prices fall, such disagreements often lead to the floating of cargoes on the seas, as sellers will be looking for buyers who can buy at favourable prices.
Most of the vessels carrying the oil are on charter, which means costs continue to accrue while the cargo remains unsold or undelivered. At a time like this, everybody loses,” Kunle said.
Nigeria’s crude sales are mostly done in advance. The question on everyone’s mind is: Why can’t the stranded crude be channelled into domestic use since the country now has a domestic refining capacity that can accommodate more crude?
Kunle said, “Ideally, this arrangement should not take Nigeria more than one month. We should be dynamic and transparent.”
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