Independent Petroleum Producers Group (IPPG), representing oil producers, has raised concerns about being compelled to sell crude oil to the Dangote Refinery and other local refineries in Nigeria. The group urged the Nigerian National Petroleum Company Limited (NNPC) to redirect its allocated crude oil volumes to local refineries to address the current crude supply shortage, which is affecting product availability across the country.
In a letter dated August 16, 2024, addressed to the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, IPPG Chairman Abdulrazak Isa suggested that the NNPC should utilize its daily allocation of 445,000 barrels of crude oil, which has previously been used to import refined products, to ease the supply issues. Isa explained that some members of the IPPG already supply crude to local refineries but emphasized that the NNPC’s allocation could alleviate the current shortage.
Isa highlighted that the NNPC historically has used this intervention volume to meet domestic consumption needs and suggested that this crude oil should now be reserved for local refineries under a price protection mechanism. He added that any national production above this allocated volume should be exported under the international market’s willing-buyer, willing-seller framework, especially as refiners may export surplus products to boost foreign exchange earnings.
The IPPG expressed concerns over recent developments, including NUPRC’s crude oil production forecast for the second half of 2024 and its request for monthly crude supply quotations from oil producers. The group objected to letters received by some of its members from the Dangote Refinery, stating that this imposed an obligation on them that contradicted the Petroleum Industry Act 2021’s willing-buyer, willing-seller principle.
Isa emphasized that while IPPG supports increasing domestic refining capacity, private businesses should not be pressured into arrangements that effectively subsidize others. He called for negotiations between refiners and producers to follow industry best practices, with long-term Sales and Purchase Agreements.
The group also raised concerns about the crude oil supply allocation for the domestic market in the second half of 2024, cautioning that the methodology seemed to favor refiners’ demands rather than local consumption needs. IPPG warned that this could lead to inefficiencies and disadvantages for producers, urging transparency from NUPRC on the allocation process and criteria.
The PUNCH reported that local refineries, including Dangote, have previously accused international oil companies of refusing to sell crude to them.
