The Nigerian National Petroleum Company Limited (NNPCL) is considering reducing the amount of crude oil it supplies to the Dangote Petroleum Refinery. Currently, the refinery receives around 300,000 barrels of crude oil per day. However, this figure may drop as other refineries in Nigeria begin operations, including the Warri and Port Harcourt refineries.
This change is part of the government’s plan to share crude oil more evenly among all local refineries. The goal is to encourage competition in the downstream sector while boosting Nigeria’s overall refining capacity. The reduction is tied to the government’s “naira-for-crude” policy, which allows local refineries to purchase crude oil in the local currency instead of dollars.
Warri and Port Harcourt Refineries Begin Operations
The Warri and Port Harcourt refineries, with a combined capacity of 135,000 barrels per day, recently resumed operations after years of inactivity. Their revival is expected to shift crude oil allocations away from Dangote’s facility to ensure all refineries receive adequate supply.
An unnamed source told newsmen: “The crude allocation to the Dangote refinery and others will likely decrease because our refineries are coming back online. The old Port Harcourt refinery is operational, and Warri recently joined. The only way to avoid a reduction is to increase Nigeria’s crude oil production.”
Crude Allocation Adjustments
Last year, the Federal Executive Council approved the naira-for-crude policy, which allocated 450,000 barrels per day of crude oil for domestic use. Dangote Refinery received 300,000 barrels per day under this agreement, while smaller refineries were assigned lesser amounts.
Now, with new players like the Warri refinery entering the scene and others like Kaduna and BUA refineries preparing to come online, the allocation system is being reviewed. Officials suggest the Dangote Refinery’s share will likely be reduced unless the country’s oil output increases.
Payment Policy Changes
The government has also introduced stricter payment terms for crude oil. Refineries must now pay upfront for crude, eliminating the previous credit-based system. This decision aims to boost government revenue but has drawn criticism from refinery operators.
Dangote Refinery’s Options
If crude supplies from NNPCL decrease, the Dangote Refinery may have to import crude oil, which would be subject to international market prices. This could affect the refinery’s production costs and overall operations.
Local Production to Meet Growing Demand
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is targeting increased crude oil production to meet rising local demand. By mid-2025, the country’s refineries will require about 770,500 barrels of crude oil daily. To address this, Nigeria is working to boost its production capacity to over 2 million barrels per day.
The revival of local refineries and the redistribution of crude oil allocations signify a major shift in Nigeria’s oil industry. The government’s focus is on reducing dependence on fuel imports, enhancing local refining capacity, and ensuring energy security for the nation.
