November 7, 2023/CSL Research

According to news reports, the inability of the NNPC to supply crude to local refineries in line with the new Petroleum Industry Act 2021 has delayed the commencement of production of refined petroleum products in about five modular refineries and the 650,000 bpd Dangote refinery. Consequently, the Dangote refinery was unable to start production in October as earlier announced. Dangote refinery remains Nigeria’s primary hope of attaining self-sufficiency in the local domestic oil refining space. The refinery, which has one of the largest production capacities in the world, would more than meet Nigeria’s domestic fuel requirements with excess capacity for exports. 

The Federal Government recently met with domestic refinery owners to address concerns regarding crude oil availability for indigenous refiners. Beyond low production, the NNPCL appears to have entered into a number of swap deals with some entities. Earlier in August, the corporation disclosed that it had entered into a US$3bn crude oil-for-loan deal with African Export-Import Bank. According to news reports, operators of the modular refineries have also complained that International Oil Companies preferred exporting the commodity to earn foreign exchange, to the detriment of domestic refiners. 

According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s oil production (with condensates) increased by 10.56% m/m in September 2023 to 1.57 mbpd compared to 1.42 mbpd recorded in August 2023. Without condensates, production grew to 1.35mbpd compared with 1.18mbpd in August. The perennial issues of pipeline vandalism, theft, and terminal shutdowns have kept production low. according to the National Security Adviser, Nuhu Ribadu, crude oil theft leads to the loss of c.400,000 barrels of oil daily. The need for the country to increase its production capacity cannot be overemphasized as the much clamoured for local refining capacity will achieve little without adequate crude supply.