FG mulls new crude pricing, supply rules to boost Dangote, other refineries

The Federal Government is considering changes to its crude oil allocation and pricing framework to improve access to feedstock for domestic refiners, including the 650,000-barrel-per-day Dangote Refinery, as the government seeks to strengthen local refining capacity.

The proposed reforms are expected to be discussed this week during a regulator-led review of the country’s Domestic Crude Supply Obligation (DCSO), according to the Crude Oil Refinery-owners Association of Nigeria (CORAN).

Dangote refinery has previously argued that Nigeria’s current pricing structure increases feedstock costs by between $3 and $4 per barrel because crude purchases are routed through producers’ trading arms.

Industry analysts said pricing, rather than physical crude availability, remains the biggest obstacle to domestic crude transactions.

The planned changes could help raise output at the Dangote Refinery, Africa’s largest, which has at times struggled to secure adequate crude supplies from local producers.

CORAN spokesperson Eche Idoko said one proposal would allow producers linked to international oil companies to deliver crude directly to nearby refineries, with volumes reconciled later at export terminals.

Idoko said the arrangement would reduce reliance on trunkline infrastructure and bring crude closer to refining facilities.

Idoko added that another proposal would allow refiners lifting crude directly from production sites to receive discounts reflecting freight and handling costs included in Brent-linked pricing but not incurred under direct deliveries.

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“This could be a win-win for both the producers and refiners,” he said.

Meanwhile, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported on Monday that producer compliance with the domestic crude supply framework rose to more than 90 per cent, up from less than 43 per cent in the previous quarter.

The regulator noted that the compliance figure measures actual deliveries against volumes allocated to producers, rather than the proportion of refinery demand met.

Under the framework, producers are required to offer allocated crude volumes to local refiners, with transactions concluded on a willing-buyer, willing-seller basis.

A senior NUPRC official said the proposals are being considered largely in response to requests from inland refiners, but stressed that implementation would require resolving issues related to crude quality differences and pricing adjustments.