Government Moves to Cut Crude Costs for Local Refineries, Boost Domestic Supply
Nigeria is considering changes to its crude oil supply and pricing framework in a move that could reduce feedstock costs and improve operations at local refineries, including the 650,000-barrel-per-day Dangote Refinery.
The proposed reforms are expected to be considered during a review of the domestic crude supply obligation, which requires oil producers to make specified volumes available to Nigerian refineries before exporting. Refiners have raised concerns that the current pricing structure increases the cost of locally sourced crude, limiting the benefits of domestic supply.
Under proposals being considered, producers could deliver crude directly to nearby refineries, reducing the need for additional transportation through existing networks. Another option would allow refiners that collect crude directly from production sites to receive price adjustments reflecting transportation and handling costs they do not incur.
The review comes as compliance with the domestic crude supply framework has improved significantly. Data from the Nigerian Upstream Regulatory Commission showed that producer compliance rose above 90 per cent, compared with less than 43 per cent in the previous quarter. However, regulators said differences in crude quality and pricing would have to be resolved before any new arrangement is implemented.
