Amid Nigeria’s ongoing struggle with a shortage of premium motor spirit (PMS), also known as petrol, and the associated issue of consistent scarcity, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has taken steps to enforce the provisions of the Petroleum Industry Act (PIA). Their aim is to ensure that local refineries receive an adequate supply of feedstock for domestic refining,leadership report.
In this context, the NUPRC has confirmed the receipt of a request from Dangote Refinery, which seeks a guarantee for the supply of 650,000 barrels of crude oil per day in preparation for its anticipated commencement in December.
The Chief Executive of NUPRC, Engr. Gbenga Komolafe, revealed these developments during a meeting with crude oil producers in Abuja. He emphasized the importance of ensuring a sufficient supply of crude oil to local refineries, fostering a willing buyer, willing seller framework within the industry.
Komolafe stressed the urgency of this matter, considering Nigeria’s status as a significant crude oil producer and exporter. He expressed his concerns about the nation’s ability to meet the feedstock requirements of local refineries, highlighting the need to shift from being a net exporter of crude oil without value addition to becoming a net exporter of refined products.
Komolafe, noting Nigeria’s position as the largest oil producer in Africa and the 7th member of OPEC, underlined that the country could no longer afford to be a net importer of petroleum products. He also cautioned that companies violating the law could face fines of up to $10,000 and the withdrawal of their export licenses.
Furthermore, Komolafe urged oil producers to prioritize supplying the volume needed for domestic refining, with an emphasis on meeting the domestic market’s demands over export. He highlighted how the industry’s failure to fulfill its domestic refining obligations has adversely impacted the economy, particularly in terms of under-recovery during the petrol subsidy regime.
He explained the concept of domestic crude oil supply obligation and the relevant regulations introduced by Section 109 of the Petroleum Industry Act, which specify the obligations of stakeholders.
The NUPRC, in situations where supply gaps arise, has the authority to issue requests for quotations to oil producers, asking them to provide quotations for the supply of crude oil to address shortages. If no resolution is reached, the Commission can impose an obligation on oil producers to supply the required crude oil to the refineries.
In cases of non-compliance, the Commission is prepared to enforce penalties, which include a $10,000 administrative fine for companies failing to respond to requests for quotations promptly. Companies that do not comply with their domestic crude supply obligation may face penalties of 50% of the fiscal price for barrels not delivered.
In summary, the NUPRC is committed to ensuring that there is an adequate supply of crude oil to domestic refineries, in line with the objectives of the Petroleum Industry Act, with a focus on adding value to the country’s crude oil resources. It is essential for oil producers to collaborate in achieving these goals for the benefit of the nation.