Local Refinery Licence Holders To Pay For Crude Oil In Naira

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The Petroleum Industry Bill which was passed by the National Assembly on Thursday allows holders of refining licenses in the country the option of paying for domestic crude oil supply in Naira.

Firms in possession of refining licences in the country are Dangote Oil Refinery Company, Waltersmith Refining & Petrochemical Company Limited, OPAC Refineries, Niger Delta Petroleum Resources, BUA Refinery & Petrochemicals and Edo Refinery and Petrochemical Company Limited.

Both chambers of the National Assembly, according to copies of the passed bills, recommended that settlement guarantees to be provided by refinery licence holders shall be made either in dollars or naira.

“Since refiners themselves may only be paid in naira for deliveries to the domestic market, it may be onerous to require US dollar payments,” the Senate Joint Committee on Downstream Petroleum Sector; Petroleum Resources (Upstream); and Gas stated in its report.

The bill calls for the establishment of two regulators, namely; the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

In Section 109 subsections 2 and 3, the National Assembly said, “The commission may issue regulations or guidelines on the mechanism for the imposition of a domestic crude oil supply obligation on lessees of upstream petroleum operations, including applicable penalties.

The authority shall supply the commission on a regular basis the crude oil requirements of refineries in operation and where shortages or inadequate supply conditions occur report such conditions to the commission.”

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The bill sent to the National Assembly provides that “the commission shall ensure that the domestic crude oil supply obligation contains the following: (a) crude oil may only be sold to holders of crude oil refining licences, whose refineries are in operation.

“b) the supply of crude oil shall be commercially negotiated between the lessee and the crude oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil; and (c) holders of crude oil refining licences shall provide payment guarantees as required by the applicable lessee and payment for crude oil purchased pursuant to obligations shall be in US dollars.”

The lawmakers, however, recommended that “holders of crude oil refining licences shall provide payment guarantees as required by the applicable lessee and payment for crude oil purchased pursuant to obligations shall be in US dollars or naira, as may be agreed between the lessees or suppliers and the licensee of the refining licence.”

The Senate said possible penalties should apply to the crude oil supply obligations in order to strengthen possible enforcement.

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