The Nigerian Upstream Petroleum Regulatory Commission has disclosed that 11 crude oil cargoes offered to local refiners in a month were not taken up despite their repeated complaints about crude shortages.
The Chief Executive of NUPRC, Gbenga Komolafe, who was represented by an official of the commission, Boma Atiyegoba, made this known during a panel session at the Crude Oil Refinery-Owners Association of Nigeria summit held recently in Lagos.
According to Komolafe, while refiners had consistently raised concerns about the non-availability of feedstock for local processing, the commission’s records showed that crude oil was being made available under the Domestic Crude Supply Obligation.
The PUNCH recalls that the 650,000-capacity Dangote refinery has consistently decried the lack of enough crude supply to its plants. Officials of the refinery said the plant was increasingly depending on the United States to get feedstock.
In the same vein, owners of crude modular refineries repeatedly complained of crude shortages, asking the Federal Government to implement the domestic crude supply obligation as enshrined in the Petroleum Industry Act.
However, Komolafe disagreed with the claims, saying there were different reasons why refiners could not take crude from oil producers monthly.
Using April as a reference, he said 48 barrels were made available for exports, out of which 21 were reserved for local refining, but only 10 were lifted by refiners.
“I will use April to make a reference in terms of the DCSO and availability of crude to the refiners. If you look at our database, in April, we have about 48 cargoes that are available for Nigeria export. Of those 48 cargoes, 21 of them were reserved for DCSO. In the month of April, there were 48 crude cargoes; 21 of the cargoes were for DCSO, which amounts to 21 million barrels of oil. Of the 21 that were offered for DCSO, only 10 of them were taken; 11 of them did not fall through,” he said.
Explaining the reasons for the unclaimed cargoes, Komolafe said the matter was largely commercial and technical, not that the oil was not available.
“That’s why we mention the issue of willing buyer, willing seller. It is a business; you go and discuss your pricing, and the commission has decided not to interfere in the commercial pricing of your business with the operators, because we don’t want to be seen to be fixing the prices. At the point of discussion, let the willing seller, willing buyer clause come in; and you know, crude oil is an international commodity, so there are a lot of factors and indices that go into the pricing,” he said.
Komolafe disclosed that eight of the cargoes were rejected due to pricing differences and crude grade preferences among the refiners.
“We have 11 cargoes that were not taken. Out of those 11, eight of them were as a result of pricing differences, while about three of them were as a result of specifications. I can tell you that the refiners also conduct what they call refining economics, and they have preferred blends in their minds that give them yields of a particular product. Even if the government makes this product available, if they don’t need that particular grade, they will not go to buy it, but that does not mean the government is not making that product available. So, in April, 21 cargoes were offered, and 10 were taken; eight of them were not taken for price discrepancies, and three were not taken due to specification. The commission is making these products available,” he said.
Also speaking during the panel session, the Executive Secretary of the African Refiners and Distributors Association, Anibor Kragha, said Nigeria’s refinery operators needed to expand the range of crude blends they could process to improve domestic refining performance.
While saying the country needs to produce more to meet its OPEC quota, he advised that there should be enough crude for export and local refining.
“Our refiners are spoilt in that, they only process one or two blends of crude. You should actually have a crude slate that your refinery can take. I know that requires a lot of money, but that’s the way to go, because ultimately, the goal is for Nigeria to get technical allowables to maximise production. Fight for your OPEC quota, but also try to increase production and refine domestically as much as you can and export as much as you can,” he said.
Vice-Chairman of the Crude Oil Refinery-Owners Association of Nigeria, Mrs Dolapo Okulaja, however, faulted the commission’s position, saying most local refiners were not getting enough crude to operate efficiently despite the legal provisions under the Petroleum Industry Act.
“We need clarity as to how much we will be getting in crude oil because there seems to be an imbalance between what we are producing and what we want to give for local refining. What are you doing about giving local refineries the amount of crude that they need to be operational? I cannot set up a 20,000-barrel refinery, and I’m only getting 10,000 or 5,000 barrels per day. How do I pay back my investors?” she asked.
Okulaja said that though the law emphasised domestic crude supply, most refiners don’t get the crude they need.
“We know we have the laws in the PIA, but the reality is that most refiners are not getting the quantity of crude they need in order to operate efficiently. If I need 300,000 barrels a month and you’re only giving me 30,000, the differential is too much for the refiner to bear,” she said.
She also rejected suggestions that Nigerian refiners were pampered by the operators.
“We are not spoilt; we are very hard-working, and we are pushing because it doesn’t make sense to export all our crude, and that’s why refiners are in the business to add value by refining our crude because there is no value added to exporting the crude. I can only blend what’s in my area; I cannot go and look for other blends because that will cost me money in transporting it to my refinery. We can only have more modular refineries spread across Nigeria where the different Bonny Light blends are,” she said.
Okulaja added that the lack of infrastructure was another major obstacle to local refining.
“Infrastructure is a problem. We cannot be delivering crude oil to refineries in tanks. There must be pipeline infrastructure, and that requires public-private collaboration,” she said.
Meanwhile, CORAN President, Momoh Oyarekhua, argued that the PIA, though designed to support local refining, had further complicated crude supply arrangements through conflicting clauses.
The PIA, in the wisdom of the people that actually drafted it, felt the domestic crude obligation must be supported. But we, in the refinery sector, still feel there is a clog in the wheel of that aspect of the PIA that is supposed to enable the refinery.
“You cannot have an obligation and also put a condition, which is the willing buyer, willing seller clause,” he said.
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