Why Nigeria’s Local Refineries Struggle to Get Crude: Minister Blames Long-Term IOC Contracts
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Nigeria’s Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, has revealed that longstanding supply agreements between International Oil Companies (IOCs) and foreign buyers are preventing local refineries, including the Dangote Petroleum Refinery, from accessing sufficient crude under the Domestic Crude Oil Supply Obligation (DSCO) framework.
Speaking at the Nigeria Energy International Summit in Abuja, Lokpobiri explained that pre-production contracts signed by most IOCs to secure long-term offtake commitments are at the heart of the crude allocation challenges facing domestic refiners.
“Many of the companies operating in Nigeria had already made commitments when they were raising funds for investment. You can’t keep what you don’t produce, and you can’t allocate what is already committed,” Lokpobiri said. He emphasised that the only viable solution to this issue is to ramp up crude oil production, allowing Nigeria to meet both its domestic and international obligations.
Local Refiners Cry Foul as Production Falls Short
The minister’s comments come amid growing frustration from local refiners, who accuse regulators of prioritising petrol import licences over domestic crude allocations. They argue that this policy choice is stifling their ability to reach full production capacity, despite the nation’s push for energy self-sufficiency.
According to industry sources, local refineries have not received any crude supply through the DSCO framework or special arrangements for over six months. This shortfall has severely impacted Nigeria’s three major operational refineries, which currently contribute less than 50% of the nation’s daily petrol consumption.
Underperformance in Upstream Sector to Blame
Lokpobiri attributed the domestic crude supply challenges to underperformance in Nigeria’s upstream sector, which he said is struggling to produce enough crude to meet both domestic and export commitments. “The reason why we are struggling in the entire sector is because the upstream is underperforming. Once the upstream succeeds, the midstream and downstream sectors will also thrive,” he explained.
He stressed the need for increased investment in the upstream sector to boost production volumes. “We need more investments to increase our production. That’s the only way to satisfy both our domestic obligation and our external commitments,” he said.
Creating a Competitive Investment Climate
The minister also pointed to the government’s efforts to create a more stable and competitive regulatory framework, aimed at attracting global investors to Nigeria’s oil and gas industry. “Within the short period we’ve been in office, we’ve made steady progress towards guaranteeing a stable, predictable regulatory and legal framework. We are implementing policies to make our fiscal terms globally competitive,” Lokpobiri noted.
A Long Road Ahead
Nigeria’s ambitions to become a major player in the global oil and gas market hinge on its ability to overcome these domestic supply challenges. With the government pushing for increased crude production and a more investor-friendly climate, the question remains whether Nigeria can break free from longstanding international commitments and prioritise local refining capacity.
For now, local refiners continue to wait, as global contracts dictate Nigeria’s crude allocations.
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