FG, Oil Producers Strike Deal for Steady Refinery Supply

FG and oil producers decide to collaborate on ensuring a steady supply of goods to refineries...

The Nigerian government and oil producers have reached a deal to ensure a steady supply of crude oil to local refineries at market-driven prices. This move aims to prevent refineries from facing feedstock shortages and promote mutually beneficial transactions. The agreement is part of efforts to implement the Petroleum Industry Act and ensure energy security in the country.

A sustainable supply of crude oil to regional refineries under a system of prices set by the market is the goal of the Nigerian Federal Government and its crude oil producers.

According to both sides, the commitment's goal was to guarantee that refineries would not run out of feedstock while operators, or producers of crude oil, went about their business as usual.

As a result, oil refiners in the nation are required by the industry watchdog, the Nigeria Upstream Petroleum Regulatory Commission, to submit a monthly price quote for crude supplies.

This occurred concurrently with reports that the $20 billion Dangote Petroleum Refinery is increasing its importation of US-sourced crude oil.

Nigeria's upstream regulator said that during a meeting called by NUPRC, oil producers under the auspices of the Lagos Chamber of Commerce and Industry's Oil Producers Trade Section consented to a mutually beneficial framework in order to prevent local refineries from being strangled by suddenly high prices.

“The focus of the meeting held at the instance of the Commission Chief Executive, Gbenga Komolafe, was on the status review of the Framework for Seamless Operationalisation of Domestic Crude Oil Supply Obligation Template.

“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,” the commission stated.

According to Komolafe, President Bola Tinubu is totally dedicated to giving producers and refiners a fair playing field on which to conduct business.

He said that a rule of engagement was necessary to make sure that the oil producers' pricing mechanism did not put domestic refineries at a disadvantage.

In order to effectively monitor and regulate transactions between parties, he required producers and refiners to furnish the NUPRC with cargo price quotes on crude supply and delivery.

The head of NUPRC noted a relationship between the country's energy security and the Domestic Crude Oil Supply Obligation, and he said his team is re-engineering its regulatory procedures to meet the obstacles.

“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,” Komolafe stated.

He stated that the NUPRC is dedicated to implementing the willing buyer/willing seller principle, ensuring mutually beneficial transactions.

“The IOCs are keen on exporting the raw materials to their home countries, creating employment and wealth for their countries, adding to their Gross Domestic Product, and dumping the expensive refined products into Nigeria - thus making us to be dependent on imported products.

“It is the same strategy the multinationals have been adopting in every commodity, making Nigeria and Sub-Saharan Africa to be facing unemployment and poverty, while they create wealth for themselves,” he had said.

Recall that last month, International Oil Companies in Nigeria were allegedly plotting to stop the new Dangote Petroleum Refinery from existing, according to Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited.

Edwin stated that the IOCs were purposefully and knowingly impeding the refinery's attempts to purchase local petroleum by raising the price above the going rate. As a result, the refinery was forced to import crude, with its associated high cost, from countries all the way up to the United States.