To ensure that local refineries get adequate and regular supplies of crude oil, Nigeria’s upstream regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has said it will enforce provisions of the Petroleum Industry Act (PIA) to compel crude oil producers to guarantee supply of crude to local refineries. Any producer that fails in its supply obligation will pay fine of $10,000, the regulator said.
The Chief executive of NUPRC, Engr. Gbenga Komolafe, disclosed this during a meeting with crude oil producers in Abuja, yesterday. He said it was important that the industry supplies enough crude oil to local refineries on a willing buyer, willing seller basis.
Komolafe said it will be a shame if the country, which is a major crude oil producer and exporter, cannot meet the feedstock requirement of the local refineries.
This is as the Commission confirmed it has received a request from Dangote Refinery to guarantee the supply of 650,000 barrels of crude oil per day ahead of its expected coming on stream in December.
“We received a request from the refinery to guarantee feedstock to the 650,000 barrels per day refinery, and we believe that as a nation, it will be a shame if we cannot meet the feedstock of the refinery.
“So this meeting was conveyed for us to collectively put heads together to address the issue of providing feedstock to our domestic refineries so that at the end of the day, the objective is for us, take this nation to the level where we become a net exporter of refined products, as against being a net exporter of crude without value addition, as we’ve experiencing,” he said.
Komolafe noted that as the largest oil producer in Africa and 7th in OPEC, Nigeria could no longer afford to be a net importer of petroleum products, saying companies which violate the law could be fined as much as $10,000 and have their export licences withdrawn.
He, therefore, urged the oil producers to make available the volume needed for local refining, stressing that supply to the domestic market would henceforth be given priority over export
He pointed out that the industry’s inability to meet its domestic refining obligations has impacted negatively on the economy given the volume taken as under-recovery during the petrol subsidy regime.
He explained that “domestic crude oil supply obligation refers to the requirements imposed by the government on oil producers to allocate a certain portion of their crude oil production for domestic consumption. This is done to ensure a stable and reliable supply of crude oil for the country’s domestic needs, including refining petroleum products.
“Section 109 of the Petroleum Industry Act introduces the domestic crude oil supply obligation to the oil industry in Nigeria in a bid to ensure crude supply to local refineries. Under section 109 subsection two of the PIA, the commission gazetted the production containment and domestic crude oil supply regulations which provides clarity of the obligations of the stakeholders”.
The Commission Chief Executive (CCE) noted that where there are supply gaps, the Commission has the responsibility to step in by issuing a “request for quotation to oil producers requiring them to submit a quotation for the supply of crude oil to meet the shortage. Upon receiving responses from the oil producers, the Commission makes available the information to the affected refineries to facilitate contract negotiations between these stakeholders. If no resolution is reached, the commission shall impose an obligation on oil producers to supply and notify the Authority of the same.
“The volume of crude oil that oil producing companies shall dedicate to the domestic crude supply obligation shall be based on an allocation system determined by the Commission”.
He stated that the Commission would take all necessary steps that would be needed to avoid an inadequate supply of crude oil to domestic refineries.
He disclosed that the Commission shall “enforce the following penalties for violations or non-compliance to the provisions of Section 109 of the Act. A company which fails to respond to requests for quotations within a specified period is liable to pay an administrative fine of $10,000 to the Commission that is for the period of default.
A company which has not complied with its domestic crude supply obligation, where a willing buyer insists, shall not be granted an export permit for the lease there. A company that fails to comply with the domestic supply obligation shall incur a penalty of 50 per cent of the fiscal price for barrels not delivered.
“This is a matter of importance to us as a nation, we have reached a point where we need value addition to our crude, we cannot be exporting crude without adding value to it and that is the intent in the PIA, and as responsible regulator we have to enforce that.
“So our appeal is to you all as producers to collaborate with us in the interest of our nation because if we develop our mainstream, that is where value lies.
“Especially with the momentum in energy transition, so we need to develop our mainstream given the multiplier effect and benefits of developing our mainstream. So it is going to be a matter of national shame if we cannot meet our domestic obligation to step up domestic refining capacity. So this is the issue. We need reliable backup to the data you want to give us, the CCE said.
The Executive Secretary of Nigeria Extractive Industries Transparency Initiative (NEITI), Dr Orji Ogbonna Orji, commended the CCE for the meeting the bold step taken to ensure local refining of oil is guaranteed.
