The Dangote Oil Refinery has called on Nigeria’s upstream oil regulator to enforce the law mandating crude oil producers to supply local refineries, highlighting that weak enforcement is driving up its operational costs.
The refinery, which has a capacity of 650,000 barrels per day and was built by Africa’s wealthiest individual, Aliko Dangote, at a cost of $20 billion on the outskirts of Lagos, is grappling with inadequate crude supplies from Nigeria. The country’s oil production is hampered by vandalism and insufficient investment.
In a statement released on Friday, Dangote Refinery criticized the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for not effectively enforcing the Domestic Crude Supply Obligation (DCSO). This provision requires crude oil producers to allocate a portion of their production to domestic refineries.
“Our concern has always been that while the NUPRC is making efforts, international oil companies are not complying with the directives,” said Anthony Chiejina, a spokesperson for Dangote Refinery.
“As a result, we frequently have to purchase Nigerian crude from international traders at an additional premium of $3-$4 per barrel, which translates to $3-$4 million extra per cargo,” he added.
The refinery reported that it is expecting to receive 15 cargoes for September, of which the Nigerian National Petroleum Corporation (NNPC) has allocated six.
In response, the NUPRC acknowledged that some producers are facing operational challenges, while others have committed most of their output to oil traders who financed their drilling activities. The commission also stated that compelling these producers to increase their domestic supply would breach existing contracts.
The Dangote Refinery requires a supply of 325,000 barrels per day (bpd), but since its operations began in January, it has only received about half of that amount, according to data from the regulator.
The DCSO, established by Nigeria’s 2021 Petroleum Industry Act, has been challenging to enforce due to declining oil production and the cash-strapped state-owned NNPC using much of its production to service crude-backed loans.
Additionally, the Dangote Oil Refinery has clashed with the downstream regulator over fuel imports as it navigates a difficult operational environment.