The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has disclosed that efforts by the government to compel upstream oil producers to allocate a portion of their crude output to local refineries met resistance from several companies last year.

According to the commission’s report, many oil producers resisted supplying crude to the Dangote Petroleum Refinery and other domestic plants, citing various operational and contractual challenges.

Despite the gazetting of the Production Curtailment and Domestic Crude Supply Obligation (DCSO) Regulations in September 2023 and ongoing engagements, some producers formally requested waivers or provided detailed explanations for their inability to meet the monthly crude supply volumes assigned to them under the DCSO policy.

“Several pushbacks from IPPG (Independent Petroleum Producers Group), OPTS (Oil Producers Trade Section), some producers, and their equity partners were received via formal letters, either requesting waivers or explaining why they could not meet their monthly obligations,” the report stated.

Implementation and Industry Engagements

In February 2024, as part of enforcing the DCSO, the commission facilitated crude supply to the Dangote refinery and other local refineries through the monthly production curtailment platform. This move was in line with the Petroleum Industry Act provisions aimed at boosting domestic refining.

The NUPRC also sought full transparency by requiring all exploration and production companies to submit copies of crude sales and purchase agreements that might affect domestic crude availability.

Multiple industry-wide sensitization efforts were carried out, involving exploration and production companies, operators, equity owners, and refinery operators, to promote understanding and compliance with the DCSO requirements.

Framework Development and Metrics

In March 2024, the commission set up a working committee comprising representatives from NUPRC, OPTS, IPPG, the Crude Oil Refinery-Owners Association of Nigeria, and the NNPC Upstream Investment Management Services. The committee’s mandate was to develop a comprehensive framework to address key issues affecting the DCSO’s implementation.

The commission developed allocation metrics based on each producer’s functional capacity considering past, current, and forecasted production—to determine daily crude supply obligations. These obligations were issued bi-annually.

The finalized DCSO guidelines, developed collaboratively with industry stakeholders, were endorsed by NUPRC Chief Executive Gbenga Komolafe on July 11, 2024.

“All companies with the forecasted capacity to produce more than 3,000 barrels per day were issued their domestic monthly obligations for the remainder of the year on July 31, 2024,” the commission explained.

Continued Resistance and Refiners’ Participation Controversy

Despite this formal allocation, pushbacks persisted in August 2024. Several producers and their partners submitted letters requesting waivers or explaining challenges in meeting the assigned volumes.

A notable point of contention arose over the participation of refinery representatives at the monthly production curtailment meetings. Following complaints from operators, the commission issued a letter in September suspending refineries’ attendance at these meetings indefinitely.

The NNPC also submitted a status report on crude supply to the Dangote refinery during this period.

Despite Challenges, Crude Supply Facilitated

Despite the opposition and operational challenges, the NUPRC emphasized that it continued to facilitate crude supply to local refineries as necessary to support Nigeria’s refining goals.