By Joyce Babayeju
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) says it has facilitated the supply of 29 million barrels of crude oil to the Dangote Petroleum Refinery and Petrochemicals despite claims by the Dangote team that the regulator is complacent in enforcing crude supply to the firm.
This is contained in a press released made available to journalists today by the management of NUPRC.
See extract below:
The Commission further rejected insinuations that it has poorly enforced the Domestic Crude Supply Obligation (DCSO), noting that as part of its commitment to ensure the enforcement of section 109 of the Petroleum Industry Act, 2021 which provides among others, the domestic supply of crude to local refineries on a ‘willing buyer, willing seller’ basis, it has ensured that Nine refineries are supplied crude despite low crude oil production.
“Despite NUPRC’s efforts to enforce the crude oil obligations through the development of the Domestic Crude Supply Obligation (DCSO) framework, the Dangote Refinery accused the NUPRC of weak enforcement of the DCSO.
The firm also accused the Nigerian National Petroleum Company Ltd (NNPCL) of not supplying the refinery with crude. In fact, they claimed the NNPCL only supplied 33 per cent of crude to the refinery.
But Dangote retracted the claim in another letter signed by the Group Chief Branding and Communications Officer, Anthony Chiejina.
It said, “Our attention has been drawn to media reports alleging that the Dangote Refinery has backtracked by acknowledging that NNPC supplied about 60 per cent of the 50 million barrels we lifted.
“Our concern has always been NUPRC’s reluctance to enforce the domestic crude supply obligation and ensure that we receive our full crude requirement from NNPC and the IOCs.”
Meanwhile, an earlier letter issued by the Dangote Refinery to the Commission Chief Executive (NUPRC) Gbenga Komolafe, dated July 24, 2024, commended the regulator for its enforcement of the DCSO.
“Let me once again commend you and your team for the successful development of the domestic crude supply obligation (DCSO) framework. This framework will lay the foundation for ensuring a stable and reliable supply of crude oil to local refineries,” the Chairman of Dangote Refinery, Aliko Dangote said in the letter.
It further said that NUPRC in its effort to enforce section 109 of the PIA, 2021 has proactively done the following:
1. Developed and gazette Regulation of the Production Curtailment and Domestic Crude Oil Supply Obligation (DSO) Regulation 2023.
2. The NUPRC took an additional step to ensure that crude producers furnish the Commission with copies of all crude oil sales and purchase agreements entered or any security interest entered, that is tied to crude oil production.
3. The commission on several occasions has also engaged Dangote and local refiners to ensure their supply quota is met in line with the provisions of the PIA.
4. For effective implementation of the DCSO, the NUPRC established a working committee comprising of NUPRC, Oil Producers Trade Section (OPTS), the Independent Petroleum Producers Group (IPPG), Crude Oil Refinery-Owners Association of Nigeria (CORAN) and NUIMS.
5. The NUPRC has facilitated domestic supply of crude oil to Dangote Refinery and other Refiners using the monthly Production curtailment platform.
These strategic commitments to Nigeria’s energy security have led to the facilitation of the supply of 32 million barrels of crude to Dangote Refinery and other local producers in the first half of 2024.
A breakdown shows that nine refineries have benefitted from the 32,088,122 barrels of crude as Dangote alone enjoyed 29,047,098 barrels out of the total supply between January to June 2024.
The Warri Refinery received 949,670 barrels; NDPR-NDPR Refinery got 823,395 barrels of crude; the Port Harcourt Refinery received 471,123 barrels; Seplat-WPSOL Refinery was allocated 419,541 barrels while Waltersmith-WSPOL Refinery got 296,353 barrels.
Other beneficiaries were Edo Refinery that got 58,504 barrels of crude and Du-port Refinery that was supplied 22,438 barrels of crude.
REQUIREMENTS IN NIGERIA ARE AS FOLLOWS:
S/N
REFINERY NAME
LOCATION
CAPACITY (BPD)
1.
ARADEL REFINERIES LTD.
OGBELE, RIVERS STATE
11,000,000
2.
OPAC REFINERIES
KWALE, DELTA STATE
10,000,000
3.
WALTERSMITH REFINERY
OHAJI-EGBEMA, IMO STATE
5,000,000
4.
EDO REFINERY &
PETRO-CHEMICAL COMPANY LTD
EDO STATE
1,000,000
5.
DANGOTE REFINERY
IBEJU LEKKI, LAGOS STATE
650,000,000
6.
(OLD) PORT-HARCOURT REFINERY
RIVERS STATE
54,000,000
7.
WARRI REFINERY
DELTA STATE
75,000,000
MODE OF CRUDE OIL PRODUCTION
Much as the NUPRC has tried to ensure the enforcement of the provisions of Section 109 of PIA, 2021, the producers have equally responded to the regulator saying that conventionally oil production is funded through pre-export financing.
This means that crude has been pledged for funding and the whole transaction is guided by the ‘Doctrine of the Sanctity of Contracts’. The parties already agreed that the licensees would pay the cost of the development and they explained to the commission that most of the funding was provided by traders at a mutually agreed price.
Aside from that, producers equally reported some operational challenges on the part of refiners which the NUPRC has consistently defended local refiners.
In fulfillment of the NUPRC mandate to enforce Section 109 of the PIA, the NUPRC has ensured that international standard practices are followed in a manner that will not scare investors and further worsen the already weak revenues from crude oil.
In the pursuit of its mandate, if it becomes necessary for the NURC to withdraw licenses, the commission will do so but it will not resort to the ‘presumptuous and arbitrary’ withdrawal of licenses because of ‘Sanctity of Contract.’.
However, the regulator as a subject matter expert is of the opinion that arbitrary revocation of licenses is not in the best interest of the country particularly in the era of low investment arising from the onslaught in energy transition.
REFERENDUM
While our dear President, Bola Ahmed Tinubu, has been vacating entry barriers to investment in oil and gas sector and introducing incentives to attract investments, it is now left for Nigerians to decide whether it is strategic for the NUPRC to apply ‘extreme penal regulatory measures’ in the enforcement of domestic supply obligations especially in the era of low investment, low production, low oil revenues and onslaught of energy transition with defunding of fossil fuel.
