The proposed changes are expected to be discussed this week as regulators review the country’s domestic crude supply obligation, which requires oil producers to offer crude to Nigerian refiners before exporting it.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) said the review could address some of the pricing and supply challenges facing refiners. Dangote Refinery has previously said Nigeria’s pricing structure can add between $3 and $4 per barrel to its crude costs because purchases are routed through producers’ trading arms.
Analysts have also identified pricing, rather than a lack of physical crude, as one of the biggest obstacles to domestic crude transactions.
Refiners seek better access to local crude
The Nigerian Upstream Regulatory Commission (NUPRC) said producer compliance with the domestic crude supply framework increased to more than 90%, from less than 43% in the previous quarter.
The figure measures actual deliveries against volumes allocated by the regulator, rather than how much crude refineries require. Under the current framework, producers must offer allocated crude to local refiners, with transactions conducted on a willing-buyer, willing-seller basis.
Dangote has turned to foreign crude
The issue has become more pressing for Dangote Refinery, Africa’s largest refinery with a capacity of 650,000 barrels per day.
In July, the refinery increased exports of refined petroleum products as domestic crude shortages limited its ability to maintain production. It has increasingly turned to international markets to secure crude, but this has created another challenge.
Because the refinery sells much of its finished fuel domestically in naira, securing the foreign exchange needed to pay for imported crude can be difficult.
The proposed reforms could therefore help reduce Dangote’s reliance on imported crude, improve refinery utilisation and support Nigeria’s broader goal of becoming self-sufficient in refined petroleum products and eventually a net exporter.
Source: Africabusinessinsider