The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has issued a stern warning to oil producers and refiners. It vows to strictly enforce the nation’s domestic crude supply obligations.
In a letter dated February 2, 2025, and addressed to exploration and production companies, as well as their equity partners, the Commission Chief Executive (CCE), Engr. Gbenga Komolafe, reiterated that diverting crude oil meant for local refineries is a violation of the law. He emphasized that any changes to cargo designations must receive express approval from the Commission.
Inconsistencies in domestic crude supply
At a recent meeting attended by over 50 stakeholders, oil refiners and producers blamed each other for the inconsistencies in the Domestic Crude Supply Obligation (DCSO) policy. Refiners accused producers of prioritizing foreign sales over domestic commitments, forcing them to seek alternative sources of feedstock. On the other hand, producers countered that refiners failed to meet commercial and operational terms, making it necessary for them to explore other markets to maintain smooth operations.
To address these challenges, NUPRC has reinforced its commitment to ensuring strict adherence to the DCSO policy. Engr. Komolafe referenced Section 109 of the Petroleum Industry Act (PIA) 2021, which mandates a stable crude supply for domestic refineries to enhance Nigeria’s energy security.
He warned that the Commission would take stringent regulatory actions against violators. Komolafe said further crude diversions would lead to the denial of export permits for designated domestic crude.
The Commission has already developed and signed the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023. That goes alongside a structured framework and procedure guide for implementation. Additionally, during monthly meetings with upstream operators, NUPRC actively monitors production metrics two months ahead to ensure refineries receive the required supply commitments.
Leveraging technology to address the challenge
Experts have suggested the use of technology to assist NUPRC in checking domestic crude diversions. They say with technological advancements could offer a lasting solution to Nigeria’s oil sector challenges.
Anlysts agree that digital tracking systems and blockchain technology could enhance transparency in crude oil transactions. They can also ensure accountability and real-time monitoring of crude allocations. By implementing smart contracts, oil producers and refiners could enforce agreed supply terms without human interference, reducing conflicts and non-compliance.
AI and big data analytics could also play a crucial role by predicting supply chain disruptions. That would ultimately optimize refinery feedstock allocations. Additionally, automation in regulatory reporting could improve compliance monitoring, allowing NUPRC to swiftly detect and address policy breaches.
As Nigeria seeks to bolster its domestic refining capacity, the integration of cutting-edge technology could be the key to bridging the gap between oil producers and refiners.
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