The Federal Government of Nigeria and the nation’s oil producers have agreed to ensure a sustainable supply of crude oil to local refineries, adopting a market-determined pricing system to balance the interests of operators and refineries.
Abuja City Journal reports that this agreement aims to optimize business operations for producers while ensuring that local refineries are not deprived of essential feedstock. The producers, operating under the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), reached this consensus during a meeting convened by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Engr. Gbenga Komolafe, Chief Executive of the NUPRC, highlighted that the meeting focused on reviewing the framework for seamless operationalization of the domestic crude oil supply obligation template. The goal is to create a mutually beneficial arrangement that prevents local refineries from being disadvantaged by high crude prices.
The meeting, held on Monday, included key industry leaders such as Osagie Okunbor, Managing Director of Shell Petroleum Development Company of Nigeria Ltd (SPDC) and country chair of Shell Companies in Nigeria; Jim Swartz, Managing Director of Chevron; Matthieu Bouyer, Managing Director/Chief Executive of Total Energies; Bolondi Fabrizio, Managing Director of Nigerian Agip Oil Company; and Samson Ezugworie, Chief Operating Officer of Seplat, among others.
The NUPRC stated that the meeting is part of its efforts to implement critical sections of the Petroleum Industry Act (PIA) 2021, particularly regarding pricing and crude supply to domestic refineries. Komolafe emphasized President Bola Tinubu’s commitment to providing a level playing field for both producers and refiners in the industry.
Komolafe stressed the need for a clear rule of engagement to ensure that pricing models from oil producers do not disadvantage domestic refineries. He directed both producers and refiners to submit monthly cargo price quotes for crude supply and delivery to the NUPRC for effective monitoring and regulation of transactions. “We need to have the price quotes monthly,” he asserted.
The convergence of the Domestic Crude Oil Supply Obligation (DCOSO) and the nation’s energy security was also highlighted, with Komolafe indicating that the NUPRC is re-engineering its regulatory processes to address existing 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 stated.
As regulators, the NUPRC is committed to upholding 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,” Komolafe noted.
He further emphasized that the NUPRC will not permit crude pricing that could negatively impact domestic refining capacity. “We will never allow price strangulation to disincentivize our domestic refining capacity optimization. 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 optimization is disallowed,” he said.
Komolafe also reiterated the NUPRC’s commitment to attracting necessary investments to boost upstream development and optimize Nigeria’s hydrocarbon resources, while ensuring sustainable domestic energy supply in the midstream and downstream sectors. “NUPRC is committed to attracting the needed investments to boost upstream development and optimization of our hydrocarbon resources just as we want sustainability of domestic energy supply in the midstream and downstream sector,” he co
