The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has issued a strong warning to crude oil producers, mandating strict compliance with the Domestic Crude Supply Obligation (DCSO). Companies failing to meet their obligations will risk losing their export licences, a move aimed at strengthening local refining capacity and ensuring energy security.
Regulatory Action: A Move to Secure Nigeria’s Energy Supply
Speaking on the directive, NUPRC Chief Executive Officer, Engr. Gbenga Komolafe, stated that enforcing local supply is not just a necessity but a legal requirement under Section 109 of the Petroleum Industry Act (PIA). He emphasised that the commission has proactively put in place the Domestic Crude Oil Supply Obligations Regulation, which is currently in force.
“This regulatory directive is in full compliance with the statutory provisions of the Petroleum Industry Act. The commission has also provided a clear guideline to ensure producers prioritise domestic refining before exports,” Komolafe stated.
Tensions Between Refiners and Producers
The enforcement of the DCSO policy comes amid tensions between local refiners and crude producers, with both parties blaming each other for non-compliance.
- Refiners claim that producers prefer to export crude due to higher international prices, leaving local refineries struggling for feedstock.
- Producers argue that refiners fail to meet commercial and operational terms, including delays in fixing vessels and securing payment guarantees.
At a recent stakeholder meeting attended by over 100 industry players, NUPRC listened to both sides before taking decisive action. The new directive mandates all producers to meet their domestic crude supply obligations before they can be granted export licences.
Dangote Refinery and the Pricing Dispute
A key issue raised in the discussions was the struggles faced by the Dangote Refinery, Nigeria’s largest refining facility. The refinery has been receiving far less crude than expected, forcing it to buy from International Oil Companies (IOCs) at a premium of $3 to $4 per barrel.
This, according to industry analysts, increases production costs and ultimately affects fuel prices for Nigerian consumers. The government’s Crude-for-Naira policy, designed to reduce pressure on foreign exchange reserves, depends heavily on ensuring that local refineries have sufficient supply.
Strict Enforcement: No More Non-Compliance
To address these concerns, the NUPRC has issued a regulatory circular stating that:
- All oil producers must meet their assigned domestic crude obligations before they can secure an export licence.
- Failure to comply will result in export restrictions, ensuring that locally refined products take precedence over international sales.
- Any producer unable to meet obligations must inform the commission directly, with valid reasons accepted only under strict regulatory oversight.
“We are not taking sides; we are simply ensuring that the rules are followed. If producers do not supply crude as required, they will not be able to export. Likewise, if refiners fail to meet financial or logistical obligations, they will face penalties,” Komolafe clarified.
Nigeria’s 2.7 Million bpd Production Target: How the NUPRC’s Strategy Aligns
With Nigeria targeting 2.7 million barrels per day (bpd) by 2027, the NUPRC is implementing strategic initiatives to increase national crude production.
- Project 1 Million Barrels Additional Volume, launched in October 2024, has already boosted production by 200,000 barrels per day, bringing the current output to 1.7 million bpd.
- The commission continues to monitor production reliability and enforce compliance to prevent inefficiencies.
Looking Ahead: Will This Policy Finally Work?
The success of this directive depends on strict enforcement and cooperation between refiners and producers. If fully implemented, it could stabilise domestic fuel supply, reduce reliance on imports, and ease forex pressures.
However, industry observers remain cautious, as past efforts to prioritise local refining have faced challenges. The coming months will reveal whether this policy marks a turning point for Nigeria’s oil industry or if producers will continue to prioritise exports over domestic needs.
For now, one thing is clear the era of ignoring domestic supply obligations is over.