Dangote Refinery Criticizes NUPRC for Failing to Enforce Petroleum Act on Crude Supply to Local Refineries

The management of Dangote Refinery has voiced strong concerns over the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) apparent inability to uphold the Petroleum Industry Act (PIA) in ensuring the domestic supply of crude oil to local refineries. In a recent statement, Anthony Chiejina, the spokesperson for Dangote Refinery, accused the regulatory body of neglecting its responsibilities under the Act, which was designed to prioritize the distribution of crude to Nigerian refineries.

According to Chiejina, the NUPRC has so far only facilitated the sale of one cargo between Dangote Refinery and crude oil producers. This, he argued, falls far short of the obligations outlined in the PIA, which mandates the supply of crude to local refineries as a priority. The refinery’s management expressed frustration that the NUPRC has not enforced this crucial aspect of the Act, leaving local refineries like Dangote’s reliant on international traders for their crude supply.

NUPRC’s Justification for Inaction Cited as “Sanctity of Contracts”

In response to the criticism, the NUPRC has cited the “sanctity of contracts” as a key reason for its failure to enforce the PIA’s provisions on crude supply. The regulatory body claimed that its hands are tied due to existing contractual agreements, which allegedly prevent them from ensuring that local refineries receive crude directly from Nigerian producers. This explanation, however, has not satisfied the management of Dangote Refinery, which argues that the NUPRC’s position undermines the intent of the PIA.

The Dangote refinery management acknowledged that the NUPRC had facilitated the allocation of 29 million barrels of crude oil to the Dangote Petroleum Refinery and Petrochemicals. However, they emphasized that they have yet to receive these cargoes, raising concerns about the efficacy of the NUPRC’s actions. The statement highlighted that aside from a bilateral term supply agreement with the Nigerian National Petroleum Corporation Limited (NNPCL), Dangote Refinery has had to rely on international middlemen for the majority of its crude supply.

Dangote Refinery Call for Direct Purchase from Domestic Producers

Dangote Refinery’s management has reiterated its demand for the ability to purchase crude oil directly from domestic producers, as intended by the PIA. The company argues that this would not only ensure a steady and reliable supply of crude to local refineries but also strengthen the Nigerian oil and gas industry by reducing dependence on international traders. According to the refinery’s spokesperson, this direct supply chain is crucial for the efficient operation of refineries in Nigeria and for the broader economic benefits it would bring.

The management expressed disappointment that the NUPRC, despite its regulatory authority, has effectively admitted its inability to enforce the domestic crude supply obligation. This failure, they argue, compromises the objectives of the Petroleum Industry Act and puts local refineries at a disadvantage. Dangote Refinery is calling for immediate action from the NUPRC to rectify this situation and uphold the provisions of the PIA in favor of local refineries.

Operational Challenges and Regulatory Responses

Since commencing operations in January, Dangote Refinery has only received approximately half of its required daily supply of 325,000 barrels per day (bpd) as stipulated under the DCSO. Data from the regulator indicates that the refinery’s operations have been hampered by the inability of oil producers to meet their supply commitments. The NUPRC, in response to these challenges, acknowledged that some producers are facing operational difficulties, while others have committed the majority of their production to oil traders who financed their drilling operations. The regulatory body also cited contractual obligations that prevent it from compelling producers to divert more of their production to local refineries.

Future Prospects and Industry Dynamics

Looking ahead, Dangote Refinery anticipates receiving 15 cargoes of crude oil for September, although the Nigerian National Petroleum Corporation (NNPC) has only allocated six cargoes to date. This underscores ongoing challenges in meeting the refinery’s supply needs amid broader issues in Nigeria’s oil sector, including declining production levels and the NNPC’s prioritization of crude oil for loan-backed transactions.

The refinery’s insistence on stricter enforcement of the DCSO reflects broader efforts within Nigeria to bolster domestic refining capacity and reduce dependency on fuel imports. However, achieving this goal requires overcoming regulatory hurdles, enhancing security measures to curb vandalism, and attracting greater investment in the upstream oil sector. As Dangote Refinery continues to navigate these challenges, its role in Nigeria’s energy landscape remains pivotal, influencing both local refining capabilities and broader economic outcomes.