… reaffirms active enforcement of PIA Section 109 for Domestic Crude Supply to Dangote, others, on ‘willing buyer, willing seller’ basis
… Dangote Refinery secures 29,047,098 barrels (90.6%) of domestic crude supply in H1 2024
… PH, Warri, 7 other refineries received 3,041,024 barrels
Thelma Tokunbo
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has dismissed as weak the allegation by Dangote Refinery that it is reluctant to enforce the Domestic Crude Supply Obligation (DCSO) and ensure the refinery receives its full crude requirements from NNPC and IOCs.
The NUPRC responded to Dangote’s claims, in a statement released on Friday and obtained by Advisors Reports.
Advisors Reports had earlier published a statement from Dangote Refinery challenging the NUPRC to fully enforce the domestic crude supply obligation as mandated by the Petroleum Industry Act (PIA).
However, the NUPRC emphasized that it has been actively enforcing Section 109 of the Petroleum Industry Act, 2021, which mandates the domestic supply of crude to local refineries on a ‘willing buyer, willing seller’ basis.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that in the first half of 2024, it facilitated the supply of 29 million barrels of crude oil to Dangote Petroleum Refinery and Petrochemicals, along with eight other refineries, under the ‘willing buyer, willing seller’ framework, despite low oil production.
The NUPRC highlighted that a letter from Dangote Refinery, dated July 24, 2024, and addressed to the Commission Chief Executive, Engr. Gbenga Komolafe, praised the Commission’s enforcement of the Domestic Crude Supply Obligation (DCSO).
Aliko Dangote, Chairman of Dangote Refinery, commended the Commission, stating: “Let me once again commend you and your team for the successful development of the domestic crude supply obligation framework. This framework will lay the foundation for ensuring a stable and reliable supply of crude oil to local refineries.”
The Commission also detailed its efforts to enforce Section 109 of the Petroleum Industry Act, 2021, including the development and gazetting of the Production Curtailment and Domestic Crude Oil Supply Obligation (DSO) Regulation 2023.
The NUPRC took additional steps to ensure that crude producers submit copies of all crude oil sales and purchase agreements to the Commission and has frequently engaged with Dangote and other local refiners to meet their supply quotas in line with the PIA.
To effectively implement the DCSO, the NUPRC stated that it also established a working committee comprising the NUPRC, Oil Producers Trade Section (OPTS), Independent Petroleum Producers Group (IPPG), Crude Oil Refinery Owners Association of Nigeria (CORAN), and NNPC Upstream Investment Management Services (NUIMS).
The Commission said that it has used the monthly production curtailment platform to facilitate domestic crude oil supply to Dangote Refinery and other refineries.
In total, the NUPRC facilitated the supply of over 32 million barrels of crude oil to domestic refineries, including Dangote Refinery, in the first half of 2024.
According to Advisors Reports, of the 32,088,122 barrels supplied, Dangote alone received 29,047,098 barrels, accounting for approximately 90.6% of the total.
The data also showed that Warri Refinery received 949,670 barrels, NDPR Refinery got 823,395 barrels, Port Harcourt Refinery received 471,123 barrels, Seplat-WPSOL Refinery was allocated 419,541 barrels, and Waltersmith-WSPOL Refinery got 296,353 barrels.
Other beneficiaries included Edo Refinery, which received 58,504 barrels, and Du-port Refinery, which was supplied 22,438 barrels.
This distribution represents 9.49% of the 32 million barrels of crude oil supplied during the period under review.
The Commission stated, “Despite the NUPRC’s efforts to enforce the provisions of Section 109 of the PIA, 2021, crude oil producers have highlighted that oil production is traditionally financed through pre-export arrangements. This means that crude oil is pledged as collateral, and these transactions are governed by the ‘Doctrine of the Sanctity of Contracts.’
“The parties involved had agreed that the licensees would cover the development costs, with most of the funding being provided by traders at a mutually agreed price,” the statement explained.
The producers also reported certain operational challenges, particularly on the part of refiners. The NUPRC has consistently supported local refiners in addressing these issues.
“In line with its mandate to enforce Section 109 of the PIA, the NUPRC has ensured that international best practices are upheld in a way that does not deter investors or further strain the already weak revenues from crude oil,” the statement continued.
The NUPRC emphasized that while it is prepared to withdraw licenses, if necessary, it will not resort to ‘presumptuous and arbitrary’ actions due to the importance of upholding contractual agreements.
As a subject matter expert, the Commission believes that arbitrary revocation of licenses is not in the country’s best interest, especially during a period of low investment driven by the global energy transition.”
The NUPRC emphasized that while President Bola Ahmed Tinubu is encouraging investment in the oil and gas sector, it is up to Nigerians to determine whether strict regulatory measures should be enforced, especially given the current challenges of low investment, production, and oil revenues, alongside the shift towards energy transition.
