FG threatens sanctions on oil producers exporting quotas meant for local refineries, tightens domestic supply rules

Tuesday, 04 February 2025 04:35

FG threatens sanctions on oil producers exporting quotas meant for local refineries, tightens domestic supply rules

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FG threatens sanctions on oil producers exporting quotas meant for local refineries, tightens domestic supply rules

The federal government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has announced a strict ban on the export of crude oil allocated for domestic refineries, aiming to boost local refining capacity and reduce pressure on foreign exchange. The move comes as approximately 500,000 barrels per day meant for domestic refining have reportedly been diverted to international markets.

New Regulatory Measures

In a letter dated February 2, 2025, NUPRC Chief Executive Gbenga Komolafe warned that the commission will deny export permits for crude oil cargoes intended for domestic refining. Any changes to designated cargoes must receive express approval from the Commission Chief Executive, with violations being treated as breaches of national law under Section 109 of the Petroleum Industry Act (PIA) 2021.

Industry Tensions

At a recent meeting attended by over 50 industry players, refiners and producers traded accusations over implementation failures of the Domestic Crude Supply Obligation (DCSO) policy:

- Refiners claimed producers preferred international sales over meeting domestic supply terms

- Producers countered that refiners failed to meet commercial and operational standards

Refinery Requirements

The NUPRC revealed that eight domestic refineries require 770,500 barrels per day for processing in the first half of 2025, representing 37% of the forecasted daily production of 2,066,940 barrels. Key refinery allocations include:

- Dangote Petroleum Refinery: 550,000 bpd

- Warri Refinery: 75,000 bpd

- Kaduna Refinery: 66,000 bpd

- Port Harcourt Refinery: 60,000 bpd

- Smaller refineries (including OPAC, WalterSmith, Duport Midstream, Edo, and Aradel): Combined allocation of 19,500 bpd

Enforcement Actions

The commission has implemented several measures to ensure compliance:

- Development of Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023

- Creation of DCSO framework and procedure guide

- Support for the Naira-for-Crude programme, enabling local refineries to purchase crude oil in naira

The initiative aligns with Nigeria's broader strategy to strengthen energy security, boost domestic refining capacity, and reduce dependence on imported refined products. The NUPRC expressed confidence in meeting these targets, citing the success of its Project One Million Barrels launched in October 2024, which has increased the nation's crude production capacity.