The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has alleged that oil producers are diverting the 500,000 barrels of crude oil allocated daily for local refineries, exacerbating the nation’s refining challenges.
The association commended the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its recent decision to ban the export of crude oil meant for domestic refineries. PETROAN believes this move will enhance local refining capacity, reduce the dependence on imported petroleum products, and ease pressure on Nigeria’s foreign exchange reserves.
Oil Producers Accused of Sabotaging Local Refining
In a statement by its Publicity Secretary, Joseph Obele, PETROAN accused oil producers of engaging in racketeering by prioritizing quick foreign exchange earnings over the government’s efforts to strengthen domestic refining.
“The exportation of crude oil meant for domestic refining has led to the abandonment of local refineries. It has been a major racketeering scheme, with producers and traders prioritising quick foreign exchange proceeds over local refining.
“Approximately, 500,000 barrels of crude oil per day are allocated for domestic refining, but these volumes often find their way to the international market,” the retailers said.
Expected Economic Impact of the Ban
PETROAN emphasized that the ban could have significant economic benefits. By refining crude oil locally, Nigeria can strengthen its petrochemical and agricultural industries, reduce income inequalities, and transition from merely exporting raw materials to supplying value-added products.
The association’s National President, Billy Gillis-Harry, urged the NUPRC to strictly enforce the policy by taking action against refineries, cargo vessels, and companies that violate the directive.
According to Harry, the implementation of this policy will ensure sufficient refined petroleum products in Nigeria, leading to price reductions and a more stable supply for consumers.
Stakeholders Trade Blame Over Domestic Crude Supply Obligation
Despite the NUPRC’s efforts, tensions remain high between oil producers and refiners. At a recent stakeholders’ meeting attended by over 50 key industry players, both sides exchanged blame over the failure to implement the domestic crude supply obligation effectively.
Oil producers argued that refiners often fail to meet commercial and operational terms, forcing them to seek international buyers to avoid operational disruptions. Refiners, however, countered that producers prioritize foreign markets, leaving local refineries struggling to secure the crude they need to operate.
Dangote Refinery’s Crude Supply Challenges
The long-standing crude supply crisis has also affected the operations of the 650,000-barrel-per-day Dangote refinery. Since its inception, the refinery has struggled with securing adequate crude supplies, leading to a standoff between crude producers and local refiners.
Alhaji Aliko Dangote, President of the Dangote Group, previously accused international oil companies of prioritizing crude sales to Asian markets, thereby undermining the refinery’s operations. In response, the NUPRC directed upstream producers to supply crude to Dangote and other local refineries.
However, the Independent Petroleum Producers Group (IPPG) resisted, arguing against being compelled to sell crude to Dangote and other refineries. The group urged the Nigerian National Petroleum Company Limited (NNPC) to reallocate its crude supply to address shortages affecting local refiners.
IPPG highlighted that some of its members had received supply nomination letters from Dangote refinery for October 2024 but contended that this approach conflicted with the Petroleum Industry Act 2021’s “willing-buyer, willing-seller” framework.
Government Intervention and Persisting Challenges
In an effort to resolve the dispute, President Bola Tinubu mandated that crude oil meant for domestic refineries be sold to Dangote and other Nigerian refineries. Despite this directive, concerns persist over whether the naira-for-crude deal that commenced in October has effectively addressed the supply challenges.
Meanwhile, reports indicate that the Dangote refinery is expecting the delivery of 12 million barrels of crude oil from the United States this month, highlighting the ongoing struggle to secure adequate local crude supplies.
The battle over domestic crude supply continues to impact Nigeria’s refining sector. While the NUPRC’s ban on crude export is a step in the right direction, stakeholders must address the lingering supply challenges to ensure the success of local refineries and reduce the country’s reliance on imported fuel.