Nigeria's growing domestic refining capacity may struggle due to insufficient and commercially unviable crude oil supply, the Crude Oil Refinery-Owners Association of Nigeria (CORAN) has warned. The association emphasized the need for stronger ties between upstream production and local refineries. CORAN's chairman, Momoh Jimah Oyarekhua, presented a 10-point policy agenda at the Nigeria Oil Refining Summit in Lagos, highlighting the importance of adequate crude supply at commercially viable terms for existing refineries.
Oyarekhua called for a shift in Nigeria's petroleum sector reform, focusing on ensuring refineries obtain sufficient crude while improving infrastructure for efficient crude and refined product movement. He noted that despite abundant crude resources, some domestic refineries face difficulties accessing crude on commercially viable terms. This challenge arises as domestic refining capacity expands, increasing demand for crude feedstock and emphasizing the need for predictable supply arrangements between producers and refiners.
CORAN is advocating for the institutionalization of the Naira-for-Crude arrangement, with transparent eligibility for domestic refineries, including modular facilities. The association also proposes a domestic crude pricing framework that considers crude quality, delivery locations, and transportation costs within Nigeria. This framework aims to enable domestic refiners to obtain feedstock under commercially sustainable conditions, ensuring that refiners can negotiate workable commercial arrangements with producers.
Stakeholders at the summit warned that current production levels may come under pressure as refinery demand increases. To address this, CORAN suggests stronger enforcement of the Domestic Crude Supply Obligation contained in Section 109 of the Petroleum Industry Act. The association also recommends increased use of crude swaps and proximity-based supply arrangements, allowing crude from producing areas to be supplied to nearby refineries without unnecessary transportation.
CORAN's proposals also include a gradual reduction in petroleum-product imports as domestic refining capacity becomes sufficient to meet national demand. The association suggests limiting imports to genuine supply gaps and strategic stock requirements. Oyarekhua emphasized that the objective is to transition Nigeria from a crude-exporting economy that imports refined products to one capable of processing a larger proportion of its crude domestically.
The transition would generate additional export earnings from refined products, creating jobs, developing local expertise, and supporting petrochemicals and manufacturing. Oyarekhua noted that refining for value means more than producing fuel; it means retaining foreign exchange and capturing greater economic value. By implementing these proposals, Nigeria can optimize its refining capacity and maximize the benefits of its abundant crude resources.
The implementation of CORAN's policy agenda would require collaboration between the government, producers, and refiners. The association's proposals aim to create a more sustainable and efficient petroleum sector, ultimately contributing to Nigeria's economic growth and development. By addressing the challenges facing domestic refineries, CORAN believes that Nigeria can unlock the full potential of its refining capacity and become a major player in the global petroleum market.
Key points
- CORAN seeks a policy shift to ensure commercially viable crude supply to local refineries.
- The association proposes a domestic crude pricing framework and increased use of crude swaps.
- CORAN advocates for a gradual reduction in petroleum-product imports as domestic refining capacity grows.
