There is no end in sight to the challenges faced by local refineries in sourcing crude oil with more than 60 million barrels of Nigerian crude oil said to be reportedly stranded and unsold, documents sighted.
The crude oil is said to be floating in the high seas while local refineries continue to struggle amidst low crude supply locally.
Inside sources raised concern over the challenges faced by local refineries despite warning by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) that crudes meant for domestic refineries should not be exported.
The NUPRC Chief Executive Gbenga Komolafe in a letter dated 2 February 2025, warned oil firms that crude designated for domestic refining must not be exported.
He said, “The diversion of crude cargo designated for domestic refineries is a contravention of the law,” adding, “The Commission will henceforth disallow export permits for such cargoes.”
Under the Nigeria’s Petroleum Industry Act (PIA), the Domestic Crude Supply Obligations (DCSO) require producers to sell crude oil to Nigerian refineries to ensure adequate feedstock for domestic refining.
But sources among local refineries indicated that this requirement is being observed in breaches with oil firms being accused of sidestepping this requirement by selling to foreign traders — predominantly in the Far East, Mediterranean Region and Southern Africa — who then resell the same crude to Nigeria at a premium of $5 to $6 per barrel above global benchmarks.
What this means is that local refineries are being priced out of their own market, according to analysts.
Bimbo Oyarinu, a public affairs analyst who spoke on the development yesterday said, “IOCs offer crude to local refineries at a significantly higher premium compared to the prices they charge in other international markets.
“This is nothing but a coordinated effort to undermine the survival of Nigerian refineries, which pose a threat to international refineries owned by some of these IOCs.
“Instead of supplying local refineries that are desperate for crude, these IOCs prefer to sell to traders who add a premium and eventually bring the same crude back to Nigeria — at a much higher cost.”
Industry analyst believes the regulator has to up its game to protect the local refineries against exploitative tendencies.
“Why should local refiners be facing these challenges in their own country? We are seeing cargoes being routed thousands of miles away only to circle back. This isn’t just inefficient,” an analyst said.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) has continued to question the inability of the regulator to ensure allocation of sufficient crude to local refineries.
CORAN’s National Publicity Secretary, Eche Idoko, recently stated that crude supply shortages have stalled the progress of at least seven refineries.
“The major challenge is availability of crude,” said Idoko. “Until recently, Nigeria was not even meeting its OPEC production quota. For refineries to reach Final Investment Decision (FID) stages, they need guaranteed feedstock. The situation right now is not helping our case.”
He added that refineries such as the Edo Refinery, which plans to expand to 30,000 barrels per day, are presently in talks with US-based crude suppliers. Only a few, like Walter Smith Refinery and Aradel Energy, which operate on their own marginal fields, are able to refine intermittently.
“Other modular refineries have not refined a single litre in the last six to eight months,” Idoko lamented.
Over time, Nigerian refineries had resorted to importing crude oil to keep their operation running.
Dangote’s refinery has already sourced crude from countries including the United States, Angola, and Algeria, as local supply remains inadequate.
As Nigeria continues to face foreign exchange shortages, rising inflation, and a sluggish economic recovery, many industry stakeholders believe the government must act decisively.
“This is a pivotal moment for the industry,” said Moses Ebirien, an oil and gas consultant based in Port Harcourt.
“We cannot afford to let international companies operate with impunity, especially when they’re undermining the very laws that are supposed to ensure Nigerians benefit from our natural resources.”
Adequate crude supply will sustain domestic refineries – Marketers
Following the licensing of 83 refineries by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), petroleum marketers have projected that Nigeria would end importation of refined petroleum in the next two years.
The National President of PETROAN, Dr Billy Gillis Harry, who spoke in Abuja, emphasised the importance of making crude oil available for local refineries.
He stated that if the refineries must remain in business, adequate provision must be made for sufficient volume of crude oil to be set aside for them, he was quoted in a statement by the National Public Relations Officer of PETROAN, Dr Joseph Obele, as saying.
The marketers also commended the NMDPRA for its efforts in promoting local refining and reducing dependence on imported petroleum products.
“The significant decline in petrol imports from 44.6 million litres per day in August 2024 to 14.7 million litres per day by April 13, 2025, is a testament to the success of this initiative.
“As we move forward, PETROAN will continue to collaborate with the NMDPRA and other industry players to address challenges and capitalise on emerging opportunities. We are confident that Nigeria’s petroleum industry will experience significant growth and transformation in the coming years.”
NMDPRA had recently disclosed that the federal government approved refining licenses for about 83 companies with a combined total refining capacity of 1,124,500.
Low crude supply may resort in high price of refined products – Expert
An oil and gas expert, Dr. Ayodele Oni in a chat with our correspondent expressed concerns over the reluctance of IOCs to supply crude to local refineries.
He said, “The reluctance to supply Nigerian refineries such as the Dangote Refinery has allegedly been attributed to the IOCs desire to be rather paid in dollars than in Naira (due to the flunctustion in the currency’s value).
“The implication of this is that there will be scarce supply (or more expensive supply from international traders) of crude oil, which will mean a higher price of the refined products from the refinery, taking into consideration the high level of demand for the refined products.
“In this regard, the NUPRC has attempted to intervene on the basis of the Domestic Crude Oil Supply Obligation (“DCOSO”) provided in the Petroleum Industry Act which mandates oil producers to supply a percentage of crude oil produced to the domestic market. In a corresponding manner, the NUPRC has also considered incentivizing producers by not limiting transactions between producers and refineries to only the Naira Currency but also includes the Dollar.
“It is envisaged that this mechanism is properly implemented by the NUPRC as efficient and timely as possible to reduce the possibility of energy insecurity.”
Harry emphasised the benefits of making crude oil available for local refineries which include increased domestic production of petroleum products, thereby reducing reliance on imported products and conserving foreign exchange, and creation of jobs and stimulation of economic growth, as local refineries would be able to operate at optimal capacity and contribute significantly to the country’s GDP.
