NUPRC Cracks Down On Crude Oil Diversion, Bars Export Of Domestic Allocation

In a decisive move to enhance local refining capacity and reduce reliance on imported petroleum products, the Federal Government has banned the export of crude oil designated for domestic refineries.

Naijaonpoint understands that this measure is also aimed at easing pressure on foreign exchange reserves.

For years, an estimated 500,000 barrels per day (bpd) of crude oil meant for local refining have been diverted to international markets, as traders and producers sought to capitalize on foreign exchange gains.

Acting through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the government has now warned that crude oil cargoes allocated for domestic refining will no longer be granted export permits.

The commission further emphasized that any changes to these allocations must receive direct approval from its Chief Executive.

Government Cracks Down on Diversions

In a letter dated February 2, 2025, and addressed to exploration and production companies along with their equity partners, NUPRC’s Chief Executive, Engr. Gbenga Komolafe, stressed that diverting crude oil intended for domestic use violates existing laws.

During a recent industry meeting involving over 50 key players, refiners and producers blamed each other for inconsistencies in the implementation of the Domestic Crude Supply Obligation (DCSO) policy.

Refiners accused producers of failing to meet supply agreements and instead selling crude on the international market, forcing them to seek alternative sources of feedstock.

On the other hand, producers argued that refiners often fail to meet commercial and operational requirements, compelling them to explore other markets to avoid operational challenges.

Despite these disputes, both parties acknowledged the need for stricter regulatory enforcement.

Regulatory Measures Strengthened

The NUPRC has warned against further breaches, urging refiners to follow international best practices in procurement and operations.

Producers were also reminded that they must not alter the conditions set under the DCSO policy without express approval from the regulatory body.

Citing Section 109 of the Petroleum Industry Act (PIA) 2021, Komolafe emphasized that the law is designed to guarantee a steady supply of crude oil to domestic refineries and safeguard Nigeria’s energy security.

He affirmed that the commission would strictly enforce compliance and take necessary regulatory actions against defaulters.

To ensure adherence, the NUPRC has introduced several measures, including the signing of the ‘Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023’ and the establishment of a procedural framework for its enforcement.

Strengthening the Naira-for-Crude Initiative

According to Vanguard, sources indicate that this latest move aligns with the government’s ‘Naira-for-Crude’ initiative, which ensures that domestic refineries receive crude oil in naira and sell refined products in the local currency.

This initiative is expected to bolster the value of the naira while ensuring that Nigeria meets its domestic fuel demand more efficiently.