The federal government through the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has introduced new regulations requiring its oil producers to sell crude oil to local refineries in a move to reduce the country’s dependence on imported refined products.

The new regulations mandate that all oil companies in Nigeria must supply crude to domestic refineries that are unable to procure it locally. Only after fulfilling these domestic supply commitments are producers permitted to export crude.

The NUPRC will serve as a middleman between local refiners and producers when agreements on crude supply cannot be finalized, helping to arrange a sales purchase agreement based on a willing-buyer, willing-seller model.

According to the regulations, payments for crude to domestic refiners can be made in dollars, naira, or a combination of both.

The regulator plans to implement the Domestic Crude Oil Supply Obligation initiative in the second half of the year. The specific quantity of crude each refinery is required to procure has not yet been determined.

Backstory

In January, the NUPRC mandated oil producers in the country to allocate around 483,000 barrels per day (bpd) to local refineries with the 650,000-barrel capacity Dangote refinery receiving the bulk share at 325,000 bpd.

Additional refineries expected to benefit from the crude oil supply are the Warri and Port-Harcourt refineries, which are projected to receive 75,000 and 54,000 barrels of crude oil per day, respectively. Also, smaller refineries such as Waltersmith, OPAC, and Niger Delta Petroleum Refinery, among others, are slated to receive up to 10,000 barrels per day.

The initiative called the Domestic Crude Supply Obligation guidelines (DCSO) aims to reduce importation of petroleum products into the country.

The Petroleum Industry Act (PIA), passed in 2021, includes a provision that requires oil producers in Nigeria to allocate a share of their crude oil to domestic refineries to avoid shortages.