The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), yesterday, said that the Domestic Crude Supply Obligations under the Petroleum Industry Act (PIA) has been fully enforced, blaming operators of domestic refineries in the country for seeking cheaper crude below international practices.
The regulator said that the issue of availability of crude to refineries has been enforced, as well as the conformity of the local market to global best practices for trading, supply and delivery of crude to the refineries, while also designing the pricing formula for crude, which aligns with international best practices.
The commission noted that the domestic refiners have pricing issues with local crude oil producers, adding that the Federal Government would not go against willing buyers and willing sellers arrangement in the PIA to introduce another subsidy or under-recovery at the upstream segment of the petroleum industry.
With investment in the nation’s oil sector already declining and production dwindling to record lows due to dearth of investment, NUPRC said that the country faces total shutdown of production if the best practices are not applied in the trading of crude oil locally.
Contrary to reports that domestic refiners are not being supplied with crude, the commission, told The Guardian that Nigerian National Petroleum Company Limited (NNPCL), the International Oil Companies (IOCs) and independent producers have been making cargoes of crude oil available to the refineries, adding that the refinery operators have series of operational deficiencies, mainly logistics and undue delay that relates to off-taking and delivery.
The Chief Executive of the Commission, Gbenga Komolafe, said that the industry would not create a situation for losses, in the form of under-recovery in the upstream petroleum. He stressed that the prices would conform to the international market.
Operators of local refineries have said that IOCs are struggling to give crude to the refineries, adding that the IOCs, active in Nigeria, want extra $6 on every barrel compared to market price.
While Nigeria produces one of the best grades of crude oil, mainly light and better than the heavy crude from the United States (US), Nigeria’s grade is usually about $10 higher than US’ WTI and slightly higher than the United Kingdom’s (UK) Brent.
Yesterday, while Nigeria’s Bonny Light was trading under the Organisation of Petroleum Exporting Countries (OPEC) quoting for about $93 per barrel, some US crude was going for $68 per barrel. That’s a difference of $25.
Komolafe said that the commission had engaged all the stakeholders in the industry, especially all the IOCs, as well as all the domestic petroleum refiners, adding that the commission had insisted that energy security remained a priority for national security and, as such, enforced the domestic crude oil obligations.
He said that immediately after the enforcement, NNPC and the IOCs started making crude cargoes available to the refineries.
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