Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has struck a deal with producers to allow sales of crude to domestic refiners at market prices, ending a supply dispute that had strained relations with international oil companies just as it has directed oil refiners in the country to provide monthly price quote on crude supply. The NUPRC directed producers and refiners to provide the commission with cargo price quotes on crude supply and delivery for effective monitoring and regulation of transactions among parties. The NUPRC gave this directive at a meeting with the crude producers under the umbrella of the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry. NUPRC chief Gbenga Komolafe, in a statement on Thursday, said the meeting agreed to concede to a framework that would be mutually beneficial to ensure that local refineries were not strangulated due to off-the-curve prices.
Mr Komolafe said the meeting was focused on the status review of the Framework for Seamless Operationalisation of Domestic Crude Oil Supply Obligation Template. Nigeria relies on imports for most of its fuel needs due to inadequate refining capacity, although a 650,000 barrel-a-day refinery built by Africa’s richest man Aliko Dangote and operational since February, should make it self-sufficient and able to export. An agreement on Wednesday follows complaints from the Dangote Refinery that oil majors were hindering local crude purchases by demanding excessive premiums or saying they had no available supplies. NUPRC said in a statement it could not allow pricing to impede domestic refining.
“We will never allow price strangulation to disincentivise our domestic refining capacity optimisation,” NUPRC’s chief Gbenga Komolafe said following talks with oil companies grouped under the Oil Producers Trade Section (OPTS). He said the regulator would work to ensure there was no “crude supply profiteering,” although he also said it did not condone any loss-making in oil production. To ensure transparency, Komolafe requested monthly cargo price quotes on crude oil supply and delivery from both producers and refiners and said it was up to the regulator to balance upstream development with a sustainable domestic energy supply chain. In March, the NUPRC chief met with oil producers and refiners to address refineries’ lack of access to locally produced crude oil.
Komolafe said the federal government and crude oil producers in Nigeria had committed to working toward a sustainable supply of crude oil to local refineries under a market-determined pricing system. According to him, the aim is to ensure that while the operators do business optimally, the refineries are not starved of feedstock. He said it was part of efforts to effectively implement key sections of the Petroleum Industry Act (PIA) 2021, especially the issue of pricing and crude supply to the domestic refineries. According to him, President Bola Tinubu is fully committed to providing a level playing ground for producers and refiners to do business in the industry. He expressed the need for a rule of engagement to ensure that the pricing model from the oil producers does not hinder the domestic refineries. “We need to have the price quotes monthly,” he directed. He pointed out a convergence between the Domestic Crude Oil Supply Obligation and the nation’s energy security, indicating that his team is re-engineering its regulatory processes to address the challenges. We allow all our processes to be transparent.
While the federal government targets the implementation of the regulation, all parties must submit to the rules of engagement as a guide for operation,” he said. The regulator, he said, was committed to driving the willing buyer/willing seller provision. “We have to discuss pricing, especially as parties have committed to respecting their domestic crude oil obligation. As the regulator, we don’t want the upstream sector to be operated sub-optimally through cost under-recovery “So, the regulator is very alive to that. In crude pricing we will never allow price strangulation to disincentives our domestic refining capacity optimisation. The regulator does not support cost under-recovery in the upstream sector, and we will continue to work to ensure that crude supply profiteering as a negative factor that can strangulate our domestic refining capacity optimisation is disallowed,” he said. He emphasised the imperative for appropriate pricing to drive willing buyer willing seller referencing guided Fiscal Oil Price published by the commission in line with the provisions of the PIA. He assured that NUPRC would continue attracting the needed investments to boost upstream development and optimise our hydrocarbon resources for sustainability of domestic energy supply in the midstream and downstream sector.
