Local Refineries Struggle to Secure Crude Oil Supplies Despite Government Intervention*

 

Nigeria's local refineries, including the Dangote Refinery, are facing significant challenges in securing adequate crude oil supplies, despite the government's efforts to support them. The federal government had announced plans to sell crude oil priced in naira to local refineries for six months starting in October, in a bid to address foreign currency access challenges.¹

However, according to Edwin Devakumar, Vice-President of Dangote Industries Limited, the refinery has been unable to secure sufficient crude oil supplies. Devakumar stated that the refinery requires 650,000 barrels per day, but the Nigerian National Petroleum Company Limited (NNPCL) has only agreed to supply a minimum of 385,000 barrels per day, which is not being met.

The Dangote Refinery, which was commissioned in May 2023, aims to compete with European refiners when operating at full capacity. However, the refinery has struggled to secure sufficient crude supplies, forcing it to turn to international markets. Recently, NNPCL purchased two million barrels of US WTI Midland crude, its first US crude purchase since August.

The challenges faced by local refineries in securing crude oil supplies have been attributed to various factors, including operational challenges and contractual obligations. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has stated that some producers are experiencing operational challenges, while others have pledged most of their output to oil traders who financed drilling.

The situation highlights the need for urgent attention to address the challenges faced by local refineries in securing crude oil supplies. This is critical to ensuring the stability of the Nigerian oil and gas industry, as well as the country's economic growth.