The Lagos State Chamber of Commerce and Industry (LCCI) has attributed the inadequate crude supply to Dangote Refinery and other local refineries to Oil Theft and Pipeline vandalism. Dr. Chinyere Almona, the Director General of LCCI, made a recent statement addressing the inadequate supply of crude oil at Nigerian refineries. During a recent Cable News Network (CNN) interview, Aliko Dangote, Chairman of Dangote Refinery, discussed the challenges International Oil Companies (IOC) faced in providing crude oil to domestic refineries.
He stated that international oil companies favoured selling the product overseas to acquire foreign currency. The Nigerian National Petroleum Corporation (NNPC) is making efforts. However, certain IOCs need help in providing crude oil. Dangote stated in the interview that everyone is accustomed to exporting and is reluctant to stop the practice. Also, Almona expressed concern over oil theft and pipeline vandalism, stating that they were challenges that limited the supply of crude oil to domestic refineries.
Pipeline and oil theft issues are limiting the refinery‘s supply.
Policy issues and theft contribute to the current situation. Discussions are currently taking place regarding IOCs’ provision of crude oil to Dangote Refinery, focusing on the disclosure of public information and initial interactions with various stakeholders. According to the Dangote Group’s public records, it has been verified that certain IOCs are providing crude oil to the Dangote refinery. Understandably, the government is working to secure a steady crude oil supply for Nigerian refineries, including Dangote.
Nevertheless, the Nigerian Petroleum Corporation Company Limited (NNPCL) and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) are requested to provide additional support to ensure a smooth transition for the new refinery in case of any disagreements related to pricing and supply contracts. Although the country’s daily crude oil production amounts to 1,281,478 barrels, not including condensates, Dangote Refinery sought out crude supply from the United States. Industry experts cited shortage as the primary reason for the delayed start of fuel manufacturing. Diesel and Aviation fuel production at Dangote Refinery started in January 2024, following its official opening in May of the previous year.
Technology such as sensor pipelines can prevent theft and vandalism.
In addition, the Nigerian government can prevent pipeline damage and oil theft by stepping up Security and surveillance around oil facilities. Modern technologies like sensor-equipped pipelines, satellite surveillance, and drones can help identify and stop theft and vandalism in real-time. Potential offenders would also be discouraged by enforcing stronger fines for those engaged in these illicit acts and strengthening law enforcement. Likewise, working with nearby communities to guarantee their benefits from the oil business can lessen support for theft and vandalism among those living there.
Also, the government has to establish regulations that incentivise International Oil Companies (IOCs) to prioritise domestic refineries to guarantee a sufficient supply of crude oil. One way to do this would be incentivising them to sell some of their products domestically instead of exporting them. Encouraging them to supply more to Nigeria can also involve modifying contract terms and prices to make them more advantageous for domestic sales. In addition, the government should think about setting up strategic reserves to maintain supply if theft or vandalism causes disruptions.
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Lastly, a complex strategy is needed to balance the demands of regional refineries and the larger economic objectives. The NNPC, local refineries, and IOCs should communicate openly to resolve supply chain concerns and guarantee accountability in the distribution of crude oil. Enhancing the operational efficiency of domestic refineries can also be achieved through investments in capacity building and Infrastructure enhancements. Nigeria may lower its need for imported crude oil and develop its energy sector by progressively reducing its reliance on imports by aligning policies and incentives to refine security.