Importing foreign crude to feed Nigerian local refineries is self-inflicted curse

As the stage is getting set for Nigerian refineries to refine Nigerian crude oil, it is just as well that a core regulatory agency is tackling, head on, a most critical part of the new market before it becomes a crisis - guaranteeing crude feedstock for the refineries.

As that news was breaking, the House of Representatives also commenced action on the National Agency for Artisanal Petroleum Refining (Establishment) Bill 2023, aimed at providing a regulatory framework for the construction and operation of small-scale refineries in the country.

Both are good pointers to a putative and vibrant oil downstream market, so long as the foundation stones are well laid: the ready supply of crude to local refineries and setting up rigorous standards for operating refineries, no matter how artisanal - in terms of fine product quality, safe operational processes and even safer environment, in conscious environmental protection and careful disposal of wastes.

For an unregulated market, artisanal refineries are often a tad removed from brazen criminality.So, a law to regulate and formalise the trade is welcome.Even more pragmatic is the prospect of grouping these small-scale players into larger cooperatives, a band that can then access funding, progressively expand their ventures and be captured in the formal tax net.That bodes good for an integrated market, other things being equal.

Still, among other indices, ready supply of crude is critical.Which is why it makes eminent sense that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) just recommitted to the Petroleum Industry Act (PIA) 2021- to adequately feed local refineries, major or minor, now springing up.

That is reassuring - and NUPRC should move fast to fulfil that mandate, viz Section 109 of PIA: Domestic Crude Supply Operation (DCSO), enacted to ensure a regular supply of crude to local refineries.

Nevertheless, that feeding refineries became an issue at all points to how perilously close to derailment a supposedly new dawn could have been.That would have been more than tragic.A ready supply of crude, within extant contractual terms, ought to be routine.It drives Nigerias comparative advantage in the global crude oil refining market.

So, any talk of importing crude, which Nigeria readily produces, should stop.NUPRC must make sure of it.Nigeria cannot transit from importing refined products to importing crude oil.That would be a self-inflicted economic curse.

As many modular refineries have been complaining of scarce crude, NUPRC should double down on its efforts to further deepen the implementation of Production Curtailment and Domestic Crude Oil Supply Obligation (PC & DCSO) Regulation 2023, under the armpit of Section 109(2) of the PIA 2021.

PC & DCSO is all about a comprehensive framework to process and approve refineries demand for crude, and getting no less comprehensive data from oil producing firms, on their crude oil off-takes and purchase agreements.This will ensure local refiners are well protected, even as the oil majors feed their export market portfolios.

NUPRC is also prompting the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA: the regulator of that segment of the oil market) to provide full information of the crude oil demands of the local refineries operating now.As the market expands and more players come into it, that file should be updated to accommodate everyone, so long as they fulfil the willing-to-sell and willing-to-buy trading protocol.

With adequate demand information, NUPRC should not hesitate to wield the big stick against any oil producing company, no matter how big or how small, to make the point that any form of sabotage would not be tolerated.

The commission reiterates its determination to apply all required penalties for default and has emphasised that a company that fails to respond to the Request for Quotation within the specified period is liable to pay an administrative fine of US$ 10, 000, a NUPRC source told This Day, while a company that has not complied with its DCSO, where willing buyer(s) exist will not be granted an export permit.

NUPRC should walk its talk.Anything towards starving local refineries crude oil should be treated as economic sabotage.Local refining is critical to Nigerias economic recovery, with forex saved from importing petroleum products plowed into physical and social infrastructure, to further grow the economy.