Domestic refiners tackle crude producers over zero allocation

Access to crude oil by domestic refiners, including modular refineries, has remained at a relatively zero level despite the rise in Nigeria’s oil output to over 1.4 million barrels per day, The PUNCH reports.

As a result, owners of refineries have called on the Federal Government to ensure that crude oil producers prioritised crude supply to domestic refiners before exporting the commodity.

This issue has resulted in significant challenges for local refineries, which are unable to operate at full capacity, limiting their potential contribution to the energy sector.

This was confirmed by the Crude Oil Refinery-owners Association of Nigeria on Thursday, making producers turn to imports for survival and increased production capacity.

The CORAN Publicity secretary, Eche Idoko, stated in an interview that domestic producers within the supply chain have been marginalised.

He confirmed that for several months, no allocation has been received under the Domestic Crude Oil Supply Obligation framework or through any other special arrangements.

He said, “Local refiners, especially the modular refineries, have not been getting crude, I mean zero allocation, under the DCSO or any other special arrangement.”

The DCSO framework, a critical part of the Petroleum Industry Act 2021, is a set of regulations and enforcement measures for crude oil supply locally.

However, about 500,000 barrels of crude oil per day meant for domestic refining have been finding their way to the international market as producers and traders shortchange the policy for quick foreign exchange proceeds.

Industry experts say the oil companies exploring and selling crude, prefer selling to international traders for foreign exchange, neglecting statutory allocations for domestic refiners.

Disturbed by the challenge, the Federal Government, through the Nigerian Upstream Petroleum Regulatory Commission, banned the export of crude oil meant to meet the needs of domestic refineries in the country.

The NUPRC Chief Executive, Gbenga Komolafe, emphasised that diverting crude oil meant for local refineries “is a violation of the law”.

He warned that the commission will henceforth deny export permits for crude oil cargoes intended for domestic refining.

But producers maintained that the domestic crude market, unless sanitised, might remain a mirage.

The CORAN publicity secretary said many members of the group have resulted in private arrangements including imports to source for products.

He, however, expressed his desire for the latest directive from the regulatory agency to be implemented.

He explained, “We have resorted to private arrangements to source for products. This process has been herculean, forcing most of the modular refineries to produce below full capacity.

“So we consider the directive by the NUPRC quite heartwarming, and we hope the IOCs will be cooperative. And none of the modules have benefited from the Naira for crude either.

“Only the NMDPRA have made attempts to reduce the cost of licensing, for which we are most grateful.

“We tend to have seen more incentives to refined petroleum importers than CORAN members who are investing heavily in the economy and helping our naira against foreign exchange.”

Despite the growth in overall production, these domestic producers remain marginalized in the supply chain, further hindering the development and independence of the local petroleum industry.

The national officer also urged President Bola Tinubu and his economic team to focus on supporting domestic producers, particularly modular refineries.

“We are appealing to Mr President and the government’s economic team to please give attention to local refineries, especially modular refineries,” he concluded.

In its recent report, the NUPRC disclosed that the Dangote Petroleum Refinery and seven other domestic refineries require 770,500 barrels of crude equivalent per day for processing in the first half (January – June) of 2025.

The refineries include the 10,000bpd OPAC refinery in Delta State, the 5,000bpd WalterSmith Refinery in Imo State, the 2,500bpd Duport Midstream in Edo State, and the 1,500bpd Edo Refinery in Edo State.

Others include the 11,000bpd Aradel Refinery in Rivers State, the 60,000bpd old Port Harcourt refinery in Rivers State, 125,000bpd Warri Refinery in Delta State and 110,000bpd Kaduna Refinery in Kaduna State.

In its first half of 2025 crude oil production forecast of producing oil companies and the refining requirement of functional refineries, the commission said, “The move is pursuant to Section 109 of the Petroleum Industry Act, 2021 and it is aimed at effective capacity utilisation of the nation’s domestic refineries by ensuring a consistent supply of crude oil.”

According to the commission, the allocation constitutes about 37 per cent of the forecasted first-half 2025 average daily production of 2,066,940bpd.

It maintained that the target will be met as its Project One million barrels, launched in October 2024, has increased the capacity of the nation to produce crude for domestic use and export.

The Petroleum Products Retail Outlets Owners Association of Nigeria recently alleged that oil producers were diverting the daily 500,000 barrels of crude oil meant for local refineries.

The association said this while commending the Nigerian Upstream Petroleum Regulatory Commission for banning the export of crude oil allocated to local refineries.

PETROAN said the move is expected to boost local refining capacity, reduce the importation of refined petroleum products, and ease pressure on foreign exchange supply.

However, efforts to get the oil producers to speak on the development through the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry were unsuccessful, as officials of the organisation stayed mute on the matter.