BREAKING: Crude producers diverting 500,000bpd meant for local refineries, PETROAN alleges

The Petroleum Products Retail Outlets Owners Association of Nigeria has alleged that oil producers are diverting the daily 500,000 barrels of crude oil meant for local refineries.

The association said this while commending the Nigerian Upstream Petroleum Regulatory Commission for banning the export of crude oil allocated to local refineries.

PETROAN said the move is expected to boost local refining capacity, reduce the importation of refined petroleum products, and ease pressure on foreign exchange supply.

According to PETROAN, many refineries have been abandoned due to the failure of oil producers to obey the domestic crude supply obligation.

In a statement by its Publicity Secretary, Joseph Obele, the association alleged racketeering, saying oil producers prioritised quick dollar earnings over the government’s efforts to boost local refining capacity.

“The exportation of crude oil meant for domestic refining has led to the abandonment of local refineries. It has been a major racketeering scheme, with producers and traders prioritising quick foreign exchange proceeds over local refining.

“Approximately, 500,000 barrels of crude oil per day are allocated for domestic refining, but these volumes often find their way to the international market,” the retailers said.

PETROAN maintained that the ban is expected to have a positive impact on the economy, as refining crude oil locally will enrich the petrochemical industries and agricultural sector, reduce inequalities in income, and enable Nigeria to transition from a raw material supplier to a value-added product supplier.

PETROAN’s National President, Billy Gillis-Harry, urged the NUPRC to take swift action against refineries, cargo vessels, and companies that default on this policy.

Harry believes that the policy will guarantee sufficient refined petroleum products in the country, leading to price reductions and better days ahead for Nigerian consumers.

However, it was gathered that at a stakeholders meeting attended by more than 50 key industry players last weekend, both refiners and producers traded blame for inconsistencies in implementing the domestic crude supply obligation.

Oil producers were said to have argued that refiners rarely meet commercial and operational terms, compelling them to explore other markets to avoid operational bottlenecks.

In response, refiners claimed that producers were failing to meet supply terms and instead preferred to sell crude abroad, forcing them to seek alternative sources of feedstock.

When the Dangote refinery came on stream, it battled crude challenges for months, leading to a prolonged crisis between crude producers and local refineries.

The President of the Dangote Group, Alhaji Aliko Dangote had accused international oil companies of prioritising Asian countries, sabotaging his refinery by refusing to supply crude.

At that time, the NUPRC ordered the players in the upstream to supply crude to Dangote and other local refineries.

But oil producers under the aegis of the Independent Petroleum Producers Group refused, warning against being forced to sell crude oil to the Dangote refinery and other local ones in Nigeria.

The IPPG also called on the Nigerian National Petroleum Company Limited to re-direct its allocated crude oil volumes to Dangote Refinery and other local refineries to mitigate the current crude supply shortage being experienced by the local refiners that is impacting local production.

The group said some of its members already owned and or were supplying crude oil to local refineries but insisted that the NNPC was in a good position to mitigate the current crude supply shortfall faced by local refiners by leveraging its statutory crude allocation for meeting local domestic consumption.

Specifically, IPPG said some of its members had received letters from the Dangote refinery for crude supply nominations for October 2024, and faulted the approach as bringing them under an obligation, saying it conflicted with the spirit of the willing-buyer, willing-seller framework prescribed by the Petroleum Industry Act 2021.

To settle the crisis, President Bola Tinubu ordered the sale of the crude meant for local refineries to Dangote refinery and others.

However, some have argued that the naira-for-crude deal, which commenced in October is yet to solve the crude challenges being faced by local refineries.

It was reported that the 650,000-capacity Dangote refinery is expecting the delivery of 12 million barrels of crude oil from the United States this month.