Efforts of the Nigerian government to mandate upstream oil producers to allocate a portion of their output to domestic refineries were resisted by several companies last year, the Nigerian Upstream Petroleum Regulatory Commission has disclosed.
According to a report by the commission, the oil firms resisted supplying crude to the Dangote Petroleum Refinery and other local plants, citing various reasons.
As the regulator strived to enforce the Domestic Crude Supply Obligation, it was said that oil producers submitted formal letters requesting waivers or outlining why they could not meet the monthly crude volumes allocated to them under the DCSO.
The resistance, it was learnt, came despite multiple engagements and the gazetting of the Production Curtailment and Domestic Crude Supply Obligation Regulations in September 2023.
“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 for waivers on the allocated monthly obligations or giving detailed explanations why they might not be able to meet up with the allocated volumes,” the report stated.
As part of its implementation strategy, the commission facilitated crude supply to Dangote refinery and other refiners using the monthly production curtailment platform in February 2024, implementing several initiatives to fulfil the Domestic Crude Supply Obligations in accordance with the provisions of the Petroleum Industry Act.
The NUPRC recalled how it sent out letters to all exploring and producing companies, requesting them to furnish the commission with copies of all functional crude sales and purchase agreements tied to crude oil sales that might impact on domestic crude oil supply.
It added that a series of industry-wide engagements were done to sensitise the stakeholders — all exploration and producing companies, operators, equity owners, refinery owners — to domestic crude supply obligations.
The commission stated that it established a working committee in March last year, comprising its officials, Oil Producers Trade Section, Independent Petroleum Producers Group, Crude Oil Refinery-Owners Association of Nigeria, and NNPC Upstream Investment Management Services to develop a comprehensive framework that addresses major concerns that could affect the implementation of the DCSO policy.
It also developed metrics that take into consideration every producer’s functional capability (past, present and forecast) before allocating them a daily obligation; to be issued to every producer on a bi-annual basis.
The DCSO guidelines formulated using the operational template jointly developed by industry stakeholders were finally endorsed by the NUPRC Chief Executive, Gbenga Komolafe, on July 11, 2024.
“All Companies with the forecasted ability to produce more than 3,000 barrels per day were issued their domestic monthly obligations for the rest of the year on July 31, 2024,” the commission said.
However, this was resisted as it received several pushbacks from IPPG, OPTS, some producers, and their equity partners via formal letters, either requesting waivers on the allocated monthly obligations or giving detailed explanations why they might not be able to meet the allocated volumes, in August.
Meanwhile, it was disclosed that the oil producers protested the presence of refiners at the curtailment meeting, and a letter was sent to them in September, cancelling the invitation sent to them for a meeting.
“Following several complaints from operators about the presence of refiners at curtailment meetings, another letter was sent to refiners, notifying them of the commission’s decision to put all refiners’ attendance at the monthly Production Curtailment Meeting on hold temporarily till further notice,” it was said.
While adding that it received a letter from the Nigerian National Petroleum Company Limited highlighting the status report on crude supply to Dangote refinery in September.
Despite the pushbacks, the commission clarified that it facilitated crude supply to local refineries as needed.
