By Abdulwaheed Sofiullahi Adeniyi, AOGR Reporter, covering Regulatory Authorities/SOEs
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has written to debunk allegations that lack of access to crude oil supply is inhibiting investment in mini-refineries, especially by companies who are non-producers of crude oil.
The commission says it has enabled the supply of 3,614,936 barrels of crude to three local refineries between September 2021 and May 2023, using the instrumentality of Domestic Crude Supply Obligation.
This, the commission declares, is “contrary to insinuations from some operators in the refinery business in Nigeria that the continued failure to supply local refineries with crude oil is capable of destroying members’ investment and stifling growth in the sector”.
The NUPRC indicated, in a statement, that only refineries that comply with the relevant requirements of Section 109 of the Petroleum Industry Act, 2021 are entitled to crude supply.
“Between January 2019 and August 2021, the period before the PIA came into effect, 1,726,049 barrels of oil were supplied to two refineries that met the requirements of the law as at the time. The two refineries are operated by Waltersmith and NDPR (now Aradel Holdings). The post PIA supplies were made to Waltersmith, NDPR and OPAC refineries”, NUPRC stated.
The Commission said it recently granted approval for Millennium Oil and Gas Limited to supply by trucking 60,000 barrels of crude oil at the rate of 20,000 barrels per month for three months to Edo Refinery and Duport Refinery in Edo State in Nigeria’s midwest. “In addition, alternate evacuation routes such as trucking of crude oil to refineries has been approved to forestall potential downtime during refinery operations which might arise due to non-availability or vandalism of pipelines”.
NUPRC insists it remains steadfast in delivering on the mandate stipulated by the PIA and will not relent in ensuring that a conducive and suitable supply of feedstock to all licensed refineries operating within the country is sustained. It further stated that any refinery operator or group of refinery operators in Nigeria not receiving or claiming not to be receiving feedstock from appropriate agencies are yet to satisfy the mandatory requirements as stipulated by law.
“The NUPRC wishes to state the facts to provide insight and clarity to the general public as follows: Section 109 of the Petroleum Industry Act (PIA) 2021 mandates that the Domestic Crude Supply Obligation (DCSO) be placed on all holders of Petroleum Mining Leases and Oil Mining Leases in Nigeria in a bid to ensure crude oil supply to local refineries. Under Section 109(2) of the Petroleum Industry Act, the Commission gazetted the Production Curtailment and Domestic Crude Oil Supply Obligation Regulations which provides clarity on the obligations of the stakeholders of the domestic crude oil supply value chain.
“The PIA prescribes its implementation mechanism requiring the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) to furnish the Commission with domestic crude requirements of licensed operating refineries on an annual basis which would form the basis for the Commission to issue the crude supply obligation on the producing companies in the upstream sector. It also mandates the requirement for the transaction to be on an arm-length commercial basis between the producer/supplier and the refiner.
“The Commission has provided an enabling framework for the supply of crude oil to be negotiated between the lessee and the oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil as stipulated in section 4 (7) (b) of the Domestic Crude Supply Obligation (DCSO) regulations in either the Nigerian Naira or the United States Dollar or a combination for flexibility to be agreed by the parties.
“Consequently, the Commission placed priority on developing this regulation for the operationalization of the mandate and developed the regulation to ensure the availability of a regulatory framework for DCSO. The Ministry of Justice has gazetted the Domestic Crude Oil Supply Obligation Regulations developed by the Commission, which provides the framework for placing crude oil supply obligations to operators of petroleum mining leases and Oil Mining Leases in Nigeria.
“Section 4(8) of the DCSO regulations states that “A lessee who has not complied with his DCSO where a willing buyer(s) exist shall not be granted an export permit for the export of crude from his lease area.” This further reaffirms the Commission’s drive to enforce DCSO to holders of oil leases within the country.”, the NUPRC concludes.