The Federal Government of Nigeria and regional crude oil producers have pledged to provide local refineries with a consistent supply of crude oil at rates set by the market. In order to avoid feedstock shortages, this program seeks to strike a balance between the needs of refineries and producers of crude oil. To help with this procedure, oil refiners are required by the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) to submit monthly bids for the price of crude supplies. This decision is in line with the $20 billion expansion in US crude imports for the Dangote Petroleum Refinery.
Under the direction of Chief Executive Gbenga Komolafe, the NUPRC stressed the significance of a pricing structure that is compliant with the Petroleum Industry Act (PIA) 2021 and advantageous to producers and refineries alike. In order to create fair competition in the business and transparent regulatory procedures, President Bola Tinubu supports this effort. The NUPRC is concentrated on preventing price manipulation and cost under-recovery in order to guarantee that domestic refineries are not adversely affected by high crude prices. The committee also aims to prevent profiteering from the crude supply while maximizing the capability for domestic refining.
A legal framework that attempts to improve the oil, gas sector is PIA 2021.
International Oil Companies (IOCs) are accused of undermining the new Dangote Petroleum Refinery by setting excessive prices for local crude, which forces the refinery to buy at a greater cost from the US, according to a complaint made by Dangote Industries Limited. Devakumar Edwin, Vice President of Oil and Gas at Dangote, claims that this arrangement hurts the refinery’s efforts while helping the IOCs’ home nations. In order to promote a willing buyer-willing seller model and improve the Sustainability of the domestic energy supply, the NUPRC emphasized the necessity of reasonable pricing.
More so, the Federal Government of Nigeria and regional crude oil producers have pledged to provide local refineries with a consistent supply of crude oil at rates set by the market. In order to avoid feedstock shortages, this program seeks to strike a balance between the needs of refineries and producers of crude oil. An important legal framework that attempts to improve Nigeria’s oil and gas sector is the Petroleum Industry Act (PIA) 2021. It aims to guarantee sustainable development, draw in investment, and increase transparency. Important elements are the downstream industry’s liberalization and the establishment of new regulatory organizations like the NUPRC.
Refiners support policies that guarantee fair pricing.
Furthermore, the introduction of a new fiscal framework to increase Government Revenue is another factor. Nigeria produces about 1.4 million barrels of crude oil per day, though this figure varies significantly depending on a number of factors, such as market conditions and regulatory changes. Nigeria imported about 100,000 barrels of refined petroleum products per day in 2022 since the country lacked the capacity for its own refining. The economic effects include lost possibilities for local industry growth and job creation, increased production costs for local refiners, and the outflow of foreign exchange for imports.
Additionally, International Oil Companies (IOCs) are accused of undermining the new Dangote Petroleum Refinery by setting excessive prices for local crude, which forces the refinery to buy at a greater cost from the US, according to a complaint made by Dangote Industries Limited. Although industry experts contend that the PIA offers a much-needed update, they also emphasize how crucial it is to apply regulations in a transparent manner and enforce them consistently. While most oil producers agree that prices should be set by the market, they also stress that stable regulations are necessary to draw in investment. Concerned about the high cost of crude supplies, refiners support policies that guarantee fair pricing and consistent supply.
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Investing in already-existing refineries and promoting the Construction of new ones in order to decrease dependency on imports are two possible approaches and answers to these problems. Fair competition and the avoidance of Market Manipulation can be achieved through the use of transparent and unambiguous pricing mechanisms. To guarantee compliance with the PIA and handle any anti-competitive behaviour, regulatory scrutiny must be strengthened. Diversifying energy sources can lessen reliance on crude oil and increase energy security, while encouraging public-private partnerships can increase Investment in the oil and gas sector.