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The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Tuesday met with crude oil producers as well as refinery owners in Nigeria in a bid to ensure full adherence to Domestic Crude Oil Supply Obligation (DCSO) as enunciated under section 109(2) of the Petroleum Industry Act (PIA).
The section compels crude oil producers in the country under the Oil Producers Trade Section (OPTS) and the Independent Petroleum Producers Association (IPPG) to reserve a portion of total crude produced to local refineries instead of exporting all the commodity.
Refinery owners have consistently complained about the non-availability of crude oil for their facilities, resulting in redundancy and huge losses.
But at the stakeholders’ engagement on the implementation of the DCSO, the Chief Executive of the NUPRC, Mr Gbenga Komolafe, told the oil producing companies that the commission had received complaints, which he said were concerning.
“The complaints received so far from within commission, oil producers and Dangote refinery that are of concerns to the commission include: Inability to factor in the provisions of the law while executing contractual agreements. This has resulted in some companies being reluctant to allocate a portion of their production to domestic refineries.
“Change in vessel nomination under 24 hours to laycan, inability to provide the required financial instrument / backing prior to loading, delay in expected time of arrival of vessels resulting in production cut which is inimical to our national budgetary targets.
“Frequent change in laycans for crude oil allocated to domestic refineries and delays at loading terminals after the arrival of the loading vessel,” he said.
He reminded the companies of section 109 of the PIA 2021, which mandates the allocation of a portion of crude oil produced by their respective companies to domestic refineries in operations.
In recognising the significance of the mandate in fostering the growth and sustainability of Nigeria’s domestic refining capacity, the NUPRC stated that the commission had been diligently working alongside the companies to ensure the effective implementation of this mandate.
“It is essential to acknowledge that the successful implementation of the DCSO requires careful coordination, collaboration, and proactive problem-solving among all stakeholders involved.
“Therefore, today’s meeting is convened with a specific objective in mind: to review the status of implementation of the mandate outlined in Section 109 of the Petroleum Industry Act (PIA).
“This includes a comprehensive examination of the challenges and complaints raised by all stakeholders involved in the allocation and offtake process,” Komolafe stated.
He noted that the aim was to identify and address the challenges effectively, with the ultimate goal of ensuring a seamless and efficient allocation process by the oil producers and offtake by the domestic refiners, in strict adherence to statutory requirements and operational best practices.
The NUPRC chief executive stated that while it is natural to encounter challenges, particularly during the initial stages of implementing DCSO, the commission was closely monitoring all developments to safeguard against any adverse impacts on national production and to prevent any violations of the DCSO provisions.
Komolafe explained that although a committee had been set up with representatives of the commission, other stakeholders as well as the Dangote petroleum refinery, to come up with a framework that will ensure hitch-free implementation of the DCSO provisions, it was necessary for to also have a discussion with the chief executives since the bulk stops at their desk.
According to him, there is the need for constructive dialogue to examine the causes of the issues and solutions on how to mitigate future re-occurrence with immediate effect.
“As a regulator, our priority is to uphold the integrity of the DCSO framework while fostering a conducive environment for the sustainable growth of Nigeria’s oil and gas industry.
“We remain dedicated to working closely with all stakeholders to overcome challenges, mitigate risks, and ensure compliance with statutory requirements,” he said.
Komolafe stated that by March 28, the committee driven by the NUPRC is expected to look at the issues and come up with a clear mandate that will resolve all the challenges.
He stated that prior to the passage of the PIA , Nigeria neglected to develop the midstream and the downstream, thereby turning the country to a net importer of refined crude.
“Under section 109, producers are expected to meet and satisfy their domestic crude oil supply obligations to the refinery so that, with that, we can reverse the trend of being a net importer of refined product and gradually energise and become a nation with vibrant midstream and downstream,” he explained.
He stated that oil remains an international commodity, wherein its operations will be guided by international best practices.
The chief executive said that one of the issues resulted in a tank top during the week, meaning that the country was already running the risk of not being able to meet its production target for the month.
During a separate presentation, the NUPRC disclosed that between December and February it scheduled 29,823,067 barrels of crude oil supply to domestic refineries.
Komolafe said 14,067,053, being 65 percent of crude oil supplied to local refineries came from NNPC, while only 15 per cent of the domestic sales/suppliers came from other oil producers’ partners/ their equity partners.
Besides, he noted that other producers supplied 3,953,170 even as other oil traders supplied 4,388,057 during the period.
Emmanuel Addeh
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