NUPRC Mandates Strict Enforcement of Crude Supply Commitments to Local Refineries

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is taking a proactive stance to ensure the enforcement of crude supply obligations to local refineries, a critical step in fostering a more stable and self-reliant petroleum industry. Engr. Gbenga Komolafe, the Chief Executive of the NUPRC, made this announcement during a meeting with crude suppliers in Abuja on November 1, 2023.

One of the primary goals of the NUPRC is to uphold the domestic crude oil supply requirements outlined in the Petroleum Industry Act (PIA) of 2021. This commitment is essential to ensuring an adequate and consistent provision of crude oil to local refineries. The recent stakeholder meeting held at the Commission’s headquarters in Abuja served as a platform for Engr. Komolafe to reiterate the importance of adhering to the laws set out in the PIA.

Section 109 of the Petroleum Industry Act particularly caught Engr. Komolafe’s attention during the meeting. This section of the Act mandates the NUPRC to allocate domestic crude oil supply obligations based on the National Crude Oil demand requirement supply curve to respective lessees. Engr. Komolafe stressed that the Commission is determined to enforce all aspects of the PIA and urged crude oil producers to provide detailed information regarding their committed and uncommitted barrels. This transparency is vital in ensuring accountability within the industry.

In accordance with the 2021 Petroleum Industry Act, the NUPRC has the authority to penalize any industry player found in violation of the regulations related to domestic crude oil supply obligations. This stern stance on enforcement underscores the Commission’s commitment to regulating the petroleum sector effectively.

In a commendable move, the Executive Secretary of the Nigerian Extractive Industry Transparency Initiative (NEITI), Mr. Orji Ogbonnaya Orji, praised the NUPRC for its consistent engagement with stakeholders in the oil and gas sector. Such interactions contribute to fostering investor confidence and a more transparent and compliant industry.

Challenges Faced by Local Refiners
The challenges faced by local refiners, including modular refineries, have been a persistent issue in Nigeria’s petroleum sector. Momoh Oyarekhua, the Chairman of the Crude Oil Refineries Association of Nigeria (CORAN), shed light on these difficulties during an interview with Arise News in July 2023.

One of the major obstacles highlighted by Oyarekhua is the difficulty in accessing crude supplies from operators. The requirement to pay for crude oil in dollars, rather than in the local currency, the naira, has also been a significant concern. Oyarekhua proposed a practical solution to these issues, suggesting that crude oil purchases be made in naira. This approach would align with local refiners’ domestic sales currency, potentially reducing pressure on the foreign exchange market. By receiving income from refined products in naira, local refiners can achieve a balance and reduce their dependency on foreign currency.

Moreover, Oyarekhua emphasized the potential benefits of supporting local refineries by ensuring they have access to nearby operators’ crude oil. This would enable them to directly refine the crude and supply it to the market, eliminating the need for extensive pipeline transportation. The direct supply of refined products to the market could also result in cost savings by bypassing the need for extensive security measures against crude oil theft.

However, Oyarekhua acknowledged that local refineries, including modular ones, face challenges in attracting equity partners. These challenges are rooted in various issues within Nigeria’s oil industry, including feedstock problems. The need for comprehensive solutions and support to address these challenges is evident, and it is a testament to the importance of the NUPRC’s commitment to enforcing domestic crude oil supply obligations.

In conclusion, the NUPRC’s commitment to enforcing crude supply obligations to local refineries is a significant step towards promoting a more self-reliant and robust petroleum industry in Nigeria. The enforcement of the Petroleum Industry Act, with a focus on Section 109, is a vital component of this commitment. Additionally, addressing the challenges faced by local refiners and modular refineries is crucial for the industry’s growth and sustainability. By creating a conducive environment for these refineries to thrive, Nigeria can enhance its energy security and reduce its dependence on foreign markets. The collaborative efforts of regulatory bodies and industry stakeholders are essential in achieving these objectives.