Nigerian crude oil producers are urging local refiners to pay for their supply obligations in United States dollars (USD). This demand was made during a meeting with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) aimed at activating domestic crude supply obligations as per Section 109 of the Petroleum Industry Act (PIA).
The PIA introduced the obligation in Nigeria’s oil industry, stating that the supply of crude oil to the domestic market should be based on a willing supplier and willing buyer system. The volume of crude oil to be dedicated to domestic supply obligations is to be determined by the NUPRC.
Stakeholders expressed concerns about the need for priority access to forex for off-takers to pay for the product competitively. They also questioned whether local refiners have the flexibility to process different crude oil types and requested an adjustment period during the transition from the pre-PIA regime to the PIA regime.
In response, the Chief Executive of the NUPRC, Gbenga Komolafe, emphasized the commission’s commitment to ensuring domestic sufficiency in oil production. He explained that any company failing to respond to a request for production within a specified period would be subject to an administrative fine of $10,000 and would not receive an export permit.
Komolafe stated that the goal is to make Nigeria a net exporter of refined products, highlighting the importance of enforcing the domestic crude oil obligation provision of the PIA. He also mentioned ongoing efforts to boost domestic refining, including modular refineries and the Dangote refinery.
Regarding concerns about USD payment terms, Komolafe noted that the law already permits transactions in either naira or USD, depending on the agreement between the parties.
The NUPRC has written to producers to provide copies of their committed agreements for the commission to assess available barrels that are not committed. The commission will also gather data on the compatibility of crude types with different refineries for implementing the obligation.
