The Federal Government has prohibited the export of crude oil designated for domestic refineries to enhance local refining capacity, decrease reliance on imported petroleum products, and alleviate pressure on foreign exchange. Previously, around 500,000 barrels of crude intended for domestic use were being diverted to international markets for quicker foreign exchange gains. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has announced that it will no longer issue export permits for crude oil meant for local refining.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) stated that any changes to crude oil shipments intended for domestic refining require explicit approval from its CEO, Engr. Gbenga Komolafe. In a letter dated February 2, 2025, he emphasized that diverting this crude is illegal. During a recent meeting with over 50 industry stakeholders, refiners and producers exchanged criticisms regarding the implementation of the Domestic Crude Supply Obligation (DCSO) policy. While refiners accused producers of failing to meet supply commitments, producers claimed refiners did not fulfill commercial terms, prompting them to seek alternative markets.
Both sides acknowledged the regulator’s efforts for effective law enforcement, but were warned against further breaches. The NUPRC reiterated that producers must not alter DCSO conditions without prior approval.
NUPRC’s Engr. Gbenga Komolafe emphasized the need for strict enforcement of the Domestic Crude Supply Obligation (DCSO) policy to stabilize crude supplies to domestic refineries. He cited Section 109 of the Petroleum Industry Act (PIA) 2021 as the basis for the policy. Komolafe stated that the commission would take regulatory action against oil companies that default on the policy. He highlighted measures already taken, including the creation of a framework and procedure guide for DCSO implementation. The move is aimed at boosting the “Naira-for-Crude” program, which ensures local refineries receive crude oil in naira and sell refined products in the local currency, helping to stabilize the nation’s energy security and strengthen the economy.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that 8 domestic refineries, including the Dangote Petroleum Refinery, require 770,500 barrels of crude oil per day for processing from January to June 2025. The refineries are located in various states, including Delta, Imo, Edo, Rivers, and Kaduna. This allocation accounts for 37% of the forecasted daily production of 2,066,940 barrels. The move is in line with Section 109 of the Petroleum Industry Act (PIA) 2021, aiming to ensure consistent crude oil supply to domestic refineries and optimize their capacity utilization.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) assured that the target for crude oil production will be achieved, bolstered by the “Project One Million Barrels” initiative launched in October 2024. This project aims to enhance the country’s capacity for domestic and export crude oil production, supporting Nigeria’s commitment to improving its refining capacity and ensuring a sustainable oil industry.
NUPRC highlighted that the forecasted daily crude requirement for domestic refineries is 770,500 barrels, making up approximately 37% of the expected daily production of 2,066,940 barrels for the first half of 2025. The crude will be sourced from several international oil companies, including Shell, Chevron, and Seplat Energy.The commission detailed the specific needs of various refineries: Dangote Petroleum Refinery requires 550,000 barrels per day (bpd), while the OPAC refinery needs 5,000 bpd. Other refineries’ requirements include WalterSmith (4,500 bpd), Duport Midstream (2,000 bpd), Edo Refinery (1,000 bpd), and Aradel (7,000 bpd), along with the Port Harcourt (60,000 bpd), Warri (75,000 bpd), and Kaduna refineries (66,000 bpd).
Nigeria’s daily average oil production rose by 7.38% year-on-year in December 2024, reaching 1.667 million barrels per day (mbpd), up from 1.552 mbpd in December 2023, signaling an improvement in the country’s crude oil supply. However, month-on-month, production decreased by 1.35% from 1.690 mbpd in November 2024.
According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), December’s peak production was 1.79 mbpd, while the lowest was 1.57 mbpd. Overall, the total oil output for the month reached 51.69 million barrels, marking a slight increase of 1.9% compared to November’s production of 50.71 million barrels.
The highest production came from Forcados Terminal (8.49 million barrels), followed by Bonny Terminal (7.78 million barrels) and Qua Iboe (4.15 million barrels). Excluding condensate, daily production was 1.484 million barrels, indicating that Nigeria did not meet its OPEC production quota of 1.5 mbpd for the month.
Additionally, the December output fell short of the 1.7 mbpd target set for the 2024 budget. NUPRC’s data showed monthly production figures throughout 2024, with December’s production at 1.67 mbpd, following a range of outputs from 1.44 to 1.69 mbpd in earlier months.
In response to concerns about inadequate crude oil supply for local refineries, NNPC Limited’s Chief Corporate Communications Officer, Femi Soneye, emphasized that NNPC is now an independent player in the oil and gas sector. He noted that the Federal Government has enacted policies designed to ensure that domestic refineries receive sufficient crude oil, thereby enhancing local refining capacity and decreasing reliance on imported petroleum products. Under the Petroleum Industry Act (PIA) of 2021, oil producers are required to allocate specific quantities of crude to domestic refineries before exporting any surplus.
Soneye highlighted that these policies demonstrate the government’s commitment to bolstering national energy security through increased local refining capabilities.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), expressed optimism about these developments, provided the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) effectively enforces the new directive. He emphasized that successful implementation could greatly benefit Nigeria’s economy, promote efficiency in the refineries, and enhance the welfare of citizens and businesses. Yusuf also pointed out that domestic sourcing of crude would improve foreign exchange stability and energy security by localizing supply chains, reducing vulnerability to external shocks.
Experts believe that increasing local sourcing of crude oil can stabilize petroleum product prices and enhance the production environment. They assert that the government has made positive strides, but emphasize the need to create conditions that encourage higher crude oil production. If supply increases, the challenges in meeting domestic crude obligations could diminish, benefiting both producers and refiners.
There is also a call for a secure environment to boost production, as it would relieve pressure on all parties involved. Although domestic crude supply obligations are vital for the country’s interests, it is crucial to continue attracting investment in crude oil production.
Prof. Wumi Iledare, a Professor Emeritus in Petroleum Economics, remarked that any changes to domestic supply obligations should be legally challenged if certain conditions weren’t met prior to their implementation, noting that these obligations should not come at giveaway prices amid an unstable exchange rate.
Dr. Bala Zakka, an energy expert from Port Harcourt, echoed that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC)’s intervention was long overdue and should have been taken sooner.
Oil prices surged on Monday following US President Donald Trump’s imposition of tariffs on Canada, Mexico, and China, sparking concerns of supply disruptions and a potential trade war. However, gains were tempered by fears of the economic consequences of a trade war.
Brent crude futures rose 1.03% to $76.45 a barrel, while US West Texas Intermediate crude futures increased 1.88% to $73.89 a barrel, reaching their highest level since January 24.Nigeria’s Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, announced that the country’s crude oil output has improved due to the removal of regulatory hurdles and collaboration among stakeholders. He attributed this improvement to President Bola Ahmed Tinubu’s directive to increase oil production to a sustainable level. As a result, the country has boosted its output from 1mbpd to 1.8mbpd, including condensates, and aims to achieve even greater heights.