March 26, 2024

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By Obas Esiedesa, Abuja

With crude oil production showing no sign of significant improvement in the country, the Federal Government has expressed concerns over the capacity of the industry to meet its domestic crude obligations to local refineries, insisting that supply to local refineries remain a priority.

Oil production in 2024 has so far failed to meet budgetary targets of 1.78 million per day and with several refineries scheduled to come on-stream this, concerns about the feedstock supply to the refineries have increased in the past month.

Speaking at a meeting to review Domestic Crude Oil Supply Obligation as contained under Section 109 (2) of the Petroleum Industry Act, PIA 2021, the Chief Executive, Nigerian Upstream Petroleum Regulatory Commission, Engr. Gbenga Komolafe insisted that priority must be given to crude supply to local refineries.

Komolafe pointed out that the overall objective of the government was to ensure that Nigeria becomes a net exporter of refined petroleum products.

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“Producers should satisfy their domestic crude oil supply to the domestic refineries so that as a nation we seize the opportunity to reverse the ugly trend by ensuring that we develop our midstream and end being a net exporter of petroleum products, especially now that we are trying to exit the subsidy regime. The only way to sustain that is to become robust in our domestic refining capacity.

He explained the Commission expects the issue to be resolved in the next 48 hours, stressing the complaints made by the producers were being taken seriously.

According to him, the “complaints received so far from within the Commission, oil producers and Dangote refinery that are of concerns to the Commission include: a. Inability to factor in the provisions of the law while executing contractual agreements. This has resulted in some companies being reluctant to allocate a portion of their production to Domestic Refineries. b. Change in vessel nomination under 24 hours to laycan. c. Inability to provide the required financial instrument / backing prior to loading. d. Delay in Expected Time of Arrival of vessels resulting in production cut which is inimical to our national budgetary targets. e. Frequent Change in laycans for crude oil allocated to domestic refineries and f. Delays at loading terminals after the arrival of the loading Vessel”.

Earlier, oil producers have pointed out that while the policy was good, meeting demands for local refineries required additional investment to boost production.

They stated that with companies trying to fulfill existing supply contracts, it was impossible for them to switch oil supply to local refineries.

Speaking at the meeting, representatives of the Oil Producers Trade Section, OPTS, and Independent Petroleum Producers Group, IPPG, said the government has to address the challenges facing the industry.

The Chairman, OPAC Refinery, Mr. Momoh Oyarekhua noted that the local refiners have received almost no crude oil from producers in the past three years.

He disclosed that despite having a refining capacity of 10,000 barrels per day, the OPAC Refinery received just 1,500bpd in 2022.

He explained that the government has to resolve the issue of currency of payments for crude oil supplied to local refineries whether it would be in Naira or dollars as demanded by the producers.

Vanguard Newspaper