By Adewale Sanyaolu
Amid the acute shortage in crude oil supply, domestic refineries have recorded a surge in their requirements for the second half of 2024, climbing to 597,700 barrels per day from 483,000 bpd in the first half of the year under review, data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has shown.
Out of the 483,000 barrels required in the first six months of 2024, the NUPRC was only able to secure 177,777 bpd from oil producers for the period under review which was significantly less than the refineries’ requests.
The increasing crude demands from refineries, coupled with oil producers’ inability to meet these demands, recently led to a dispute between the 650,000-bpd Dangote Refinery and the NUPRC.
Dangote Refinery criticised the NUPRC for not enforcing a law that mandates oil producers to supply domestic refiners, worrying that the regulator’s inaction is driving up its operational costs.
The Dangote Refinery, Africa’s largest, is being forced to increase crude imports due to inadequate domestic supplies, potentially hindering its ambitions for the year.
NUPRC said oil producers are unable to meet demands due to operational challenges and prior commitments to traders who financed drilling, insisting that compelling producers to increase supply would breach their contracts. The regulator also forecasted a national average crude oil production of 1.7 million barrels per day (bpd) by December 2024, exceeding the 1.57 million bpd projection for January-July, which producers failed to achieve.
“This data provides insight into the projected crude oil needs for the refineries, crucial for understanding the energy landscape in Nigeria for the second half of 2024,” Chief Executive of NUPRC, Mr. Gbenga Komolafe, said in a statement.
According to NUPRC data, eight refineries are slated to become operational starting August, boasting a combined refining capacity of 864,500 barrels per day (bpd).
This means oil producers will be required to supply approximately 432,250 bpd, representing over half of the total capacity.
A total of 52 oil producers, including; TotalEnergies, Chevron, Shell, and ExxonMobil, will provide the crude oil, primarily from their joint venture operations with the Nigerian National Petroleum Company Limited (NNPCL).
Dangote Refinery recently urged the NUPRC to enforce the Domestic Crude Supply Obligation (DCSO).
The DCSO is a legal requirement for crude oil producers to allocate part of their output to domestic refineries.
Dangote Refinery criticised the NUPRC for not upholding the DCSO, highlighting that it expected to receive 15 cargoes in September, but the Nigerian National Petroleum Corporation (NNPC) had allocated only six.
“Our concern has always been that the NUPRC is pushing, but the international oil companies are not following the instructions. Consequently, we often purchase the same Nigerian crude from international traders at an additional $3-$4 premium per barrel which translates to $3-$4m per cargo.”