FG Intervenes in Crude Dispute: ‘DCSO Is Not Paper Allocation, Naira-for-Crude Is Here to Stay
CHIGOZIE AMADI
The Federal Government has warned crude oil producers and domestic refiners to stop treating each other as enemies, saying Nigeria cannot achieve energy security if upstream and downstream keep fighting over crude supply.
This as it called for a reliable framework for crude oil supply to domestic refineries. Stressing that Domestic Crude Supply Obligation (DCSO) should evolve into a reliable, transparent and commercially bankable system.
The Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, stated this while delivering his address at the at the 3rd Nigerian Oil Refining Summit 2026 organised by the Crude Oil Refinery Owners Association of Nigeria, CORAN.
The summit theme is “Refining for Value: Linking Upstream Supply to Downstream Demand.
Lokpobiri, who was represented by his Technical Adviser, Mr Umar Gwandu said he regretted his absence due to a prior official commitment but commended CORAN for sustaining dialogue on how to transform crude resources into domestic value.
“Nigeria can no longer afford to view crude production, refining and petroleum-product consumption as separate segments. They are interconnected parts of one value chain,” the address read.
He said for decades Nigeria produced crude on a large scale while depending heavily on imported products, but the strategic direction now is to capture value through domestic refining, petrochemicals and industrial activities, anchored on the Petroleum Industry Act, 2021.The Minister outlined three priorities of government policy: securing reliable feedstock, balancing commercial interests, and de-risking investment
On feedstock, he said a refinery cannot operate without crude, and government’s position is clear: production must increasingly support domestic value addition while remaining commercially sustainable for investors.
He pointed to Section 109 of the PIA which provides for Domestic Crude Supply Obligation, DCSO, and empowers the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, to enforce it.”The Domestic Crude Supply Obligation should not be viewed merely as an administrative allocation mechanism.
It is an important instrument for advancing national energy security,” he said.He disclosed that NUPRC has developed the DCSO framework in consultation with NNPC Ltd, OPTS, IPPG, CORAN and refiners, and expects it to evolve from a regulatory obligation into a reliable, transparent and bankable supply system.
He also defended the Naira-for-Crude initiative, saying it is designed to supply crude to local refineries in local currency to reduce foreign-exchange pressure and create predictability.”The broader objective is straightforward: where Nigeria possesses the crude, the refining capacity and the market, we must increasingly create conditions for value to be captured within Nigeria.”On balancing the market, the Minister said the biggest lesson from DCSO implementation so far is that sustainability cannot come from confrontation.
“Nigeria cannot achieve sustainable refining by treating upstream producers and domestic refiners as opposing sides. They are participants in one petroleum value chain.
“He said while the willing-buyer, willing-seller principle remains fundamental, DCSO provides the regulatory tool for national energy security, and government must eliminate situations where crude is theoretically available but cannot be commercially delivered.”We must avoid creating a regulatory environment in which upstream investment is undermined by commercially unsustainable obligations,” he warned.
He urged transparent, long-term bankable contracts that give refiners certainty and preserve incentives for producers.
The third pillar, he said, is investment de-risking. Building refineries requires huge capital and investors ask legitimate questions: What are the rules? Will they remain predictable? Can feedstock be secured? Can products be sold? Can capital be repatriated?
“Capital is mobile. Investors will compare Nigeria with competing jurisdictions,” he said. “Our regulatory system must compete not only for investment, but also for investor confidence.
“He stressed that regulators should enforce rules without unnecessarily determining commercial outcomes, and that properly executed agreements must be respected.
The Minister also called for mobilisation of patient capital from development finance institutions, export credit agencies, regional banks and private investors, welcoming the new Africa Energy Bank as strategic partner for refining and petrochemicals, plus evacuation, storage, terminals and distribution infrastructure.
He then outlined what he called the Federal Government’s Refining Policy Compact: strengthen DCSO, encourage balanced commercial arrangements, pursue transparent and bankable regulation, mobilise domestic and international capital, and work with stakeholders to fix bottlenecks.”Government’s role is to establish a level, transparent and predictable playing field — not to predetermine commercial winners. Domestic refining is not simply an industrial-policy objective. It is a national energy-security priority.”
“Nigeria must capture more value from every barrel produced,” he concluded, urging the summit to move “from crude abundance to refining capacity; from refining capacity to industrial value creation; and from policy intent to measurable delivery.”
