Nigerian Government Threatens Oil Firms with Export Ban Over Dangote Refinery Crude Supply Bypass

Government Issues Stern Warning to IOCs

The Federal Government of Nigeria has intensified its efforts to ensure a consistent supply of crude oil to domestic refineries, issuing a strong warning to International Oil Companies (IOCs) and local producers. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) announced that it will no longer grant export permits to firms that fail to meet their domestic crude oil supply obligations (DCSO). This directive is part of a renewed strategy to enhance Nigeria's energy security and guarantee a steady feedstock for local refining operations, particularly for the 650,000-barrels-per-day Dangote Refinery. ,

Allegations of Bypassing Local Refineries

International oil companies, including Shell and Total, have been specifically named among those allegedly bypassing local refineries. , These companies are accused of prioritizing foreign oil traders over domestic processing plants, which has reportedly left local refineries struggling to secure adequate crude supplies. The Dangote Group has previously stated that it often resorts to purchasing Nigerian crude from international traders at an additional premium of $3 to $4 per barrel, attributing this to the non-compliance of IOCs with NUPRC's instructions regarding the DCSO. ,

Legal Mandate and Enforcement

The NUPRC's stance is firmly rooted in the provisions of the Petroleum Industry Act (PIA), which mandates crude oil producers to prioritize local supply before engaging in exports. , Gbenga Komolafe, Chief Executive of the NUPRC, emphasized that the domestic crude supply obligation is 'not optional' but a 'regulatory requirement designed to improve Nigeria's energy security.' , He further clarified that if a company fails to meet its domestic obligation, it 'will not be cleared to export a single barrel.' The NUPRC, in collaboration with the Nigerian Midstream and Downstream Petroleum Regulatory Authority, determines the crude requirements of local refiners every six months and monitors compliance through export permits and vessel clearances.

Dangote Refinery's Supply Challenges

Despite its significant capacity, the Dangote Refinery has faced ongoing challenges in securing its full crude oil requirements from domestic producers. , For instance, for a recent month, the refinery's requirement was 15 cargoes, but the Nigerian National Petroleum Company Limited (NNPC) allocated only six. When the refinery approached IOCs operating in Nigeria for the remaining supply, they were reportedly redirected to the international trading arms of these companies or informed that cargoes were already committed elsewhere. While NNPC has a two-year crude supply agreement with Dangote Refinery and holds 20% equity in the plant, ensuring a right of first refusal for crude supply, the refinery has previously accused NNPC of falling short on deliveries. , , ,

Implications for Nigeria's Energy Future

This decisive action by the Nigerian government underscores its commitment to leveraging domestic refining capacity to achieve self-sufficiency in petroleum products and reduce reliance on imports. The enforcement of the domestic crude supply obligation is expected to boost local production, strengthen the nation's energy security, and potentially stabilize the local currency by reducing the need for foreign exchange for fuel imports. ,