The Federal Government of Nigeria has announced plans to progressively move away from an economy that primarily exports crude oil and instead capture more value through domestic refining, petrochemicals, and associated industrial activities. This strategic direction was highlighted by the Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, at the third Nigeria Oil Refining Summit in Lagos. Lokpobiri emphasized the need for Nigeria to strengthen its domestic refining capacity to ensure energy security.
According to Lokpobiri, Nigeria has, for decades, produced crude oil on a significant scale while remaining heavily dependent on imported petroleum products. The minister stated that the Federal Government is strengthening the Domestic Supply Obligation (DSO) to ensure domestic refineries have reliable access to crude. This policy is critical to the country’s energy security, and the government expects the DSO framework to evolve into a reliable, transparent, and commercially bankable crude supply system.
The Chairman of the Crude Oil Refiners Association of Nigeria (CORAN), Momoh Oyarekhua, noted that some domestic refineries are still struggling to access crude on commercially viable terms despite Nigeria’s abundant resources. Oyarekhua called for the full institutionalization of the naira-for-crude deal, stronger enforcement of the DSO, and crude swap arrangements that would allow refineries to access nearby crude. He emphasized that refining for value means more than producing fuel, as it also involves retaining foreign exchange, creating jobs, and supporting petrochemicals and manufacturing.
The Chairman of the Independent Petroleum Producers Group (IPPG), Adegbite Falade, warned that Nigeria could face a major crude supply challenge as domestic refinery demand increases. Falade noted that domestic refineries could require more than 1.5 million barrels of crude per day in the medium term. He emphasized that Nigeria cannot solve the growing demand for refinery feedstock simply by redistributing existing crude production among domestic refineries, but rather by growing the production base.
Falade called for increased exploration, faster development activity, marginal-field growth, improved access to capital, and measures to ensure Nigeria remains competitive for upstream investment. He also urged the government and industry to protect and modernize crude evacuation infrastructure, including pipelines, terminals, storage facilities, jetties, and marine logistics. Additionally, Falade emphasized the need for a genuine domestic crude market capable of aggregating volumes from different producers and facilitating transparent swaps and substitutions.
Lokpobiri’s position was supported by the Nigerian Upstream Petroleum Regulatory Commission, which has developed a DSO framework in consultation with industry stakeholders. The framework aims to ensure that crude is commercially delivered to local refiners. The minister warned against situations where crude is available but cannot be commercially delivered to local refiners, emphasizing the need for alignment between crude production and refining capacity.
The Nigerian government’s push for domestic refining is expected to have a positive impact on the country’s economy, creating jobs and reducing dependence on imported petroleum products. The government’s efforts to strengthen the DSO and promote domestic refining are seen as critical steps towards achieving energy security and capturing more value from Nigeria’s crude oil resources. Key players in the industry have been urged to work together to ensure the success of these initiatives.
Key points
- The Nigerian government aims to progressively move away from crude oil exports and capture more value through domestic refining and petrochemicals.
- The government is strengthening the Domestic Supply Obligation to ensure domestic refineries have reliable access to crude.
- Industry stakeholders have called for increased exploration, improved access to capital, and modernization of crude evacuation infrastructure to support domestic refining.
