Nigeria must mandate a crude supply for domestic refiners, according to Dangote Refinery

The Dangote Oil Refinery has expressed its concern that slack implementation of a legislation requiring producers to feed local refineries is driving up operating costs and has called on Nigeria’s upstream oil regulator to enforce the law.

Built on the outskirts of Lagos for $20 billion by Africa’s richest man, Aliko Dangote, the refinery has a capacity of 650,000 barrels per day, but it has failed to secure enough supplies from Nigeria, where poor investment and vandalism hinder oil output.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), according to a statement released by Dangote Refinery on Friday, is not enforcing the Domestic Crude Supply Obligation (DCSO), a regulation that mandates that producers of crude oil provide a percentage of their output to domestic refiners.

A spokesman for Dangote Refinery, Anthony Chiejina, said in the statement, “Our concern has always been that the NUPRC is pushing, but the international oil companies are not following the instructions.”

“Consequently, we often purchase the same Nigerian crude from international traders at an additional $3-$4 premium per barrel which translates to $3-$4 million per cargo,” he stated.

The refinery stated that NNPC had assigned them six of the fifteen shipments that it anticipated receiving in September.

The NUPRC added in a statement that although some producers were facing operational difficulties, others had committed the majority of their production to oil dealers who funded drilling. Additionally, it said that making them increase their supply would be against their contracts.

According to statistics from the regulator, Dangote Refinery needs 325,000 bpd of supplies, but since it opened for business in January, it has only gotten around half that amount.

The 2021 Petroleum Industry Act in Nigeria established the DCSO, but because of declining oil production and the financially stressed state-owned Nigerian National Petroleum Corporation, which uses a large portion of its output for loans secured by crude, it has been challenging to implement.

In addition, the downstream regulator and the Dangote Oil Refinery had a falling out over fuel imports as the refinery tries to survive in a tough, new market.