Nigeria's upstream oil regulator announced on Monday that it would henceforth refuse export permits to producers who fail to meet their crude supply quota to local refineries, including Dangote's refinery, the largest in Africa.
Under the Petroleum Industry Act, oil producers, including international companies, are required to supply a defined volume of crude to domestic refineries before exporting their production. However, the latter claim that they are not complying with this obligation because the prices offered by refiners are deemed to be uncompetitive, a situation that has led the Dangote refinery to demand strict application of the law.
In a statement published on Monday, the Nigerian Upstream Petroleum Regulatory Commission said that its director, Gbenga Komolafe, had issued a warning to oil exploration and production companies about the consequences of failing to comply with this requirement.
Last week, the Commission organised a meeting between producers and refiners to discuss this issue. During the meeting, the refiners accused the producers of not respecting the supply obligation, while the producers replied that the prices offered were not competitive, prompting them to look for other markets. Faced with this impasse, Komolafe warned that "the diversion of crude oil shipments destined for national refineries is a violation of the law and that the Commission will henceforth prohibit export permits for these shipments".
According to a timetable published by the oil regulator, Nigerian refineries will need 770,500 barrels of crude per day in the first half of 2025. The Dangote refinery alone will need 550,000 barrels a day.
This decision marks a key step in Nigeria's drive to strengthen its local refining industry and reduce its dependence on imports of refined petroleum products. It remains to be seen whether a compromise will be found between producers and refiners to guarantee crude supplies while ensuring the economic viability of the various stakeholders.
