Nigeria’s Oil Regulator to Crack Down on Crude Suppliers for Local Refineries

The NUPRC says it will enforce the PIA and penalize any violators of the domestic crude oil supply obligations

by Motoni Olodun

Nigeria’s oil regulator, the NUPRC, has warned crude suppliers to comply with their obligations to provide adequate crude oil to local refineries, as stipulated by the new Petroleum Industry Act (PIA).

The PIA, signed into law in August 2021, aims to reform the oil and gas sector and ensure its sustainability, transparency, and accountability. One of the provisions of the Act is to allocate domestic crude oil supply obligations based on the national demand curve to respective lessees.

The NUPRC Chief Executive, Engr. Gbenga Komolafe said this during a meeting with crude suppliers in Abuja on November 1. He said the Commission would enforce the PIA and penalize any industry player that violates the regulations.

He also urged crude oil producers to provide the NUPRC with details of their committed and uncommitted barrels to enhance transparency and accountability within the industry.

The PIA has been hailed as a landmark legislation that will boost Nigeria’s oil and gas sector, which accounts for about 10% of its GDP and 90% of its foreign exchange earnings. The Act also aims to attract more investment, create more jobs, and increase the revenue of the government and the host communities.

However, the PIA has faced challenges and criticisms, especially from oil-producing states and regions unhappy with allocating the 3% derivation fund to develop the host communities.

Another challenge is the availability and affordability of crude oil for the local refineries, especially the modular ones, which can potentially reduce the country’s dependence on imported petroleum products.

According to the Crude Oil Refineries Association of Nigeria (CORAN), modular refineries face difficulties in accessing crude supplies from operators and paying for crude oil in dollars rather than in naira, which is their domestic sales currency.

The CORAN Chairman, Momoh Oyarekhua, said in a July 2023 interview that if the local refineries received adequate support and had access to crude oil from nearby operators, they could directly refine the crude and supply it to the market, reducing the need for pipeline transportation and security costs.

He also said that buying crude oil in naira would ease the pressure on the foreign exchange market and create a balance between the income and expenditure of the local refiners.

The NUPRC has assured the stakeholders that it will work with them to ensure the smooth implementation of the PIA and the growth of the oil and gas sector. The Commission has also received commendation from the Nigerian Extractive Industry Transparency Initiative (NEITI) for its continuous stakeholder engagement.

The NEITI Executive Secretary, Mr. Orji Ogbonnaya Orji, said such interactions foster investor confidence and promote good governance in the industry.

The NUPRC, established by the PIA, is responsible for regulating the upstream petroleum operations, including exploration, production, transportation, and storage of crude oil and natural gas.

The Commission is also mandated to ensure the optimal development and utilization of the country’s petroleum resources, in line with the national interest and the principles of good oil field practice.

The NUPRC hopes to achieve its vision of making Nigeria a leading oil and gas producer in Africa and the world while ensuring the protection of the environment and the welfare of the host communities.

Source: Nairametrics

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