KEY POINTS
• Crude producers offered 182 million barrels to domestic refiners between January and August, while 112 million barrels were transacted.
• NUPRC says the 70 million barrel difference reflects commercial challenges involving pricing, payment security, crude grades and delivery schedules.
• The regulator is working on a domestic crude swap arrangement and measures to increase production as refinery demand grows.
MAIN STORY
Crude producers offered more oil to Nigerian refineries than the plants declared they needed between January and August, but a significant portion of those offers did not result in completed transactions, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has said.
Mrs Oritsemeyiwa Eyesan, Chief Executive Officer of NUPRC, said producers offered 182 million barrels during the eight-month period, compared with domestic refiners’ declared requirement of 154.6 million barrels.
Of the crude offered, 112 million barrels, representing 61.4 per cent, were transacted. This leaves about 70 million barrels between the volume offered and the volume that resulted in completed transactions.
Eyesan, represented by NUPRC Deputy Director, Mr Boma Atiyegoba, disclosed the figures at the third Nigeria Oil Refining Summit in Lagos on Monday.
She said the difference should not be interpreted as a breakdown between producers and refiners, pointing instead to commercial conditions that can prevent an offer from becoming an actual transaction.
“This gap is not a failure on either side. It is a shared commercial challenge,” she said.
According to Eyesan, the parties face different constraints during negotiations. Producers are seeking adequate payment security, dependable off-takers and flexibility around existing export commitments, while refiners are focused on securing suitable crude, predictable delivery and workable prices.
NUPRC said it was responding by improving information available to both sides of the market. Eyesan said the commission would strengthen visibility around refinery requirements and producer availability, while increasing monitoring and compliance with domestic supply obligations.
The regulator is also developing mechanisms that could make it easier to match crude with nearby refineries.
Eyesan said consultations had been completed on a proposed domestic crude swap system. Under the arrangement, producers located closer to export terminals could transfer their domestic supply obligation to producers whose crude is geographically closer to local refineries.
The proposed system is intended to reduce the distance crude has to travel, lowering logistics costs and shortening delivery periods while improving compliance with domestic supply requirements.
Beyond improving transactions, NUPRC said Nigeria needs to increase the amount of crude available in the first place as domestic refining capacity grows.
Eyesan said the commission was accelerating field development and working to bring shut-in wells and marginal assets back into production.
She said expanding refinery capacity without increasing crude production would create greater competition for a limited supply of feedstock.
“Domestic refining cannot thrive by distributing a shrinking cake. It must be fed by a growing one,” Eyesan said.
Mr Adegbite Falade, Chairman of the Independent Petroleum Producers Group, also said higher crude production was necessary to support the expansion of domestic refining.
“Nigeria cannot refine barrels that are not produced,” Falade said.
He argued that increasing production, rather than simply reallocating existing crude among competing users, should be central to meeting the additional demand created by local refineries.
Falade also called for better crude evacuation infrastructure and a domestic market that gives producers and refiners sufficient transparency and investment certainty.
The Domestic Crude Supply Obligation operates under Section 109 of the Petroleum Industry Act and is based on willing-buyer, willing-seller arrangements.
THE ISSUES
- The volume of crude offered to domestic refiners exceeded their declared requirement during the period, but only about three-fifths of the offers translated into completed transactions. This shows that availability alone does not guarantee a successful crude sale.
- Producers and refiners face different commercial concerns, ranging from payment security and export commitments to crude quality, pricing and delivery schedules. These factors can prevent potential transactions from being completed.
- As more refining capacity becomes available, Nigeria faces a parallel upstream challenge. Domestic plants will require a larger and more dependable supply of crude, making increased production as important as improving the mechanism for allocating existing output.
WHAT’S BEING SAID
“This gap is not a failure on either side. It is a shared commercial challenge.” — Oritsemeyiwa Eyesan, Chief Executive Officer, NUPRC
“The Commission is listening, and we are active.” — Oritsemeyiwa Eyesan, Chief Executive Officer, NUPRC
“Domestic refining cannot thrive by distributing a shrinking cake. It must be fed by a growing one.” — Oritsemeyiwa Eyesan, Chief Executive Officer, NUPRC
“Nigeria cannot refine barrels that are not produced.” — Adegbite Falade, Chairman, Independent Petroleum Producers Group
WHAT’S NEXT
NUPRC plans to strengthen monitoring of domestic crude supply, improve information on refinery demand and producer availability, and enforce domestic supply obligations where required.
The commission is also progressing with its proposed crude swap mechanism, which could allow producers to meet domestic supply commitments through geographically closer crude sources.
On the production side, field development and the return of shut-in wells and marginal assets are being accelerated to increase the volume of crude available to both domestic and export markets.
BOTTOM LINE
The figures show that Nigeria’s domestic refining challenge is not simply about how much crude producers offer. Between January and August, producers offered more crude than refiners said they needed, yet 70 million barrels did not translate into completed transactions. Improving commercial terms, logistics and supply mechanisms will therefore have to go alongside higher crude production if expanding refineries are to secure sufficient feedstock.
