Contrary to insinuations from some operators in the refinery business in Nigeria that the continued failure to supply local refineries with crude oil is capable of destroying members’ investment and stifling growth in the sector, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said it has delivered 3,614,936 barrels of crude to three local refineries between September 2021 and May 2023.
A statement issued by the management of NUPRC in Abuja on Wednesday, indicated that only refineries that comply with the relevant requirements of Section 109 of the Petroleum Industry Act, 2021 are entitled to crude supply. Between January 2019 and August 2021 the period before the PIA came into effect, 1,726,049 barrels of oil were supplied to two refineries that met the requirements of the law as at the time. The two refineries are operated by Walter Smith and NDPR. The post PIA supplies were made to Walter Smith, NDPR and OPAC refineries.
It stated that the Commission recently granted approval for Millennium Oil and Gas Limited to supply by trucking 60,000 barrels of crude oil at the rate of 20,000 barrels per month for three months to OPAC and Duport refineries in Edo State. In addition, alternate evacuation routes such as trucking of crude oil to refineries has been approved to forestall potential downtime during refinery operations which might arise due to non-availability or vandalism of pipelines.
It was emphatic that the Commission remains steadfast in delivering on the mandate stipulated by the PIA and will not relent in ensuring that a conducive and suitable supply of feedstock to all licensed refineries operating within the country is sustained. It further stated that any refinery operator or group of refinery operators in Nigeria not receiving or claiming not to be receiving feedstock from appropriate agencies are yet to satisfy the mandatory requirements as stipulated by law.
It pointed to the fact that the Commission has provided regulatory support for qualified refineries by ensuring adequate crude oil supply. It restated its commitment to transparency and determination to work within the provisions of the PIA; which is why data concerning its operations with industry operators are always made available for public scrutiny.
“The NUPRC wishes to state the facts to provide insight and clarity to the general public as follows: Section 109 of the Petroleum Industry Act (PIA) 2021 mandates that the Domestic Crude Supply Obligation (DCSO) be placed on all holders of Petroleum Mining Leases and Oil Mining Leases in Nigeria in a bid to ensure crude oil supply to local refineries. Under Section 109(2) of the Petroleum Industry Act, the Commission gazetted the Production Curtailment and Domestic Crude Oil Supply Obligation Regulations which provides clarity on the obligations of the stakeholders of the domestic crude oil supply value chain.
“The PIA prescribes its implementation mechanism requiring the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) to furnish the Commission with domestic crude requirements of licensed operating refineries on an annual basis which would form the basis for the Commission to issue the crude supply obligation on the producing companies in the upstream sector. It also mandates the requirement for the transaction to be on an arm-length commercial basis between the producer/supplier and the refiner.
“The Commission has provided an enabling framework for the supply of crude oil to be negotiated between the lessee and the oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil as stipulated in section 4 (7) (b) of the Domestic Crude Supply Obligation (DCSO) regulations in either the Nigerian Naira or the United States Dollar or a combination for flexibility to be agreed by the parties.
“Consequently, the Commission placed priority on developing this regulation for the operationalization of the mandate and developed the regulation to ensure the availability of a regulatory framework for DCSO. The Ministry of Justice has gazetted the Domestic Crude Oil Supply Obligation Regulations developed by the Commission, which provides the framework for placing crude oil supply obligations to operators of petroleum mining leases and Oil Mining Leases in Nigeria.
“Section 4(8) of the DCSO regulations states that “A lessee who has not complied with his DCSO where a willing buyer(s) exist shall not be granted an export permit for the export of crude from his lease area.” This further reaffirms the Commission’s drive to enforce DCSO to holders of oil leases within the country.”
The Commission also stated that following the directive by the President, in May 2023, to resume full regulatory control of all Terminals, it has been receiving and processing applications for barging and trucking permits.
It pointed out that the responsibility of periodically determining domestic crude oil demands lies expressly with NMDPRA. Such demands when it becomes available, is used to allocate supply obligation to lessees in line with the provisions of the DCSO regulations.
