Minister Explains Why Domestic Refineries Are Not Getting Enough Crude Oil Supply

• The minister of state for petroleum resources has finally explained why domestic refineries are not getting enough crude supply
• Dangote Refinery and other domestic refineries have complained about insufficient and unstable crude supply for months
• They accused the NNPCL and petroleum regulators of preferring to issue petroleum import licenses than encourage local production

Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.

Amid continuous talks of insufficient crude oil supply to local refineries, the minister of state for petroleum resources, Senator Heineken Lokpobiri, has come clean on the matter.

Senator Lokpobiri noted that these local refineries were not getting enough crude oil from the Nigerian National Petroleum Corporation Limited (NNPCL) because there wasn’t enough to go around.

Speaking at the Nigeria Energy International Summit in Abuja on Wednesday, February 26, Lokpobiri disclosed that the amount of unencumbered crude oil would not be enough to supply local refineries.

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He listed pre-existing commitments that tied down hundreds of thousands of barrels to particular customers.

Lokpobiri revealed that even for the International Oil Exploration Companies operating in Nigeria, many had signed long-term supply agreements with their customers before commencing production.

This means that most of the crude oil being produced in Nigeria today has already been tied up in existing supply agreements and contracts, the PUNCH reports.

Domestic refineries complain of insufficient crude supply

Frustrations have been mounting recently as local refineries claimed to be left stranded with unstable crude supply. Many claimed that the insufficient crude oil they receive daily has sabotaged their production efforts as they barely get enough to engage in sustainable production.

The Dangote Refinery made public its plans to source crude oil from the international market, as the local supply was unstable and insufficient to help it attain full capacity.

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Fingers pointed to the NNPCL and petroleum regulators as encouraging fuel importation rather than supplying the local refineries crude oil to produce locally. Some refineries even claimed they had received zero crude supply in six months.

The local refiners accused the regulator of deliberately hampering them from reaching full production capacity and preferring to issue petroleum import licenses.

Despite claims from NNPCL that it allows fuel importation to supplement the shortfalls in local production, the local refineries insist that it is a deliberate attempt to keep a vacuum for the imported fuel to meet.

Nigeria is underproducing crude oil

The minister added in his statement that Nigeria will need to improve crude production to have more crude for domestic supply.

Lokpobiri stated:

“The companies operating in Nigeria had commitments when they were raising funds for investment. They cannot sell what they have already committed. We can’t distribute what we don’t produce. If we boost our crude production output, we can meet both domestic needs and international obligations.”

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He noted that the sector is underproducing and in need of significant investments. Lokpobiri expressed optimism that more investments would come as the government creates a business-friendly and predictable regulatory environment.

Group asks NNPC to supply local refineries first

In related news, a citizens' group called on the Nigerian National Petroleum Company Limited (NNPCL) to prioritise crude oil supply to local refineries, including the privately owned Dangote Refinery.

This came amid growing concerns over a reported reduction in allocations to favour supply to foreign partners.

The group criticised NNPCL's claims about the Warri and Port Harcourt refineries' output, citing inefficiency and lack of evidence of fuel production.

Proofreading by Nkem Ikeke, journalist and copy editor at Legit.ng.

Source: Legit.ng