Nigeria Mulls Crude Pricing Reforms to Support Dangote, Local Refiners

By Adedapo Adesanya

Nigeria is considering reforms to its crude allocation and pricing framework to ease feedstock supply constraints facing local refiners, including the 700,000-barrel-per-day Dangote Refinery, according to the Crude Oil Refinery-owners Association of Nigeria (CORAN).

The proposed reforms are expected to be discussed this week as the Nigerian Upstream Regulatory Commission (NUPRC) reviews the implementation of the domestic crude supply obligation, which requires oil producers to supply Nigerian refineries before exporting crude.

According to CORAN spokesperson, Mr Eche Idoko, one proposal would allow producers within an international oil company’s network to deliver crude directly to nearby refineries, with the volumes reconciled later at the terminal.

Mr Idoko said the arrangement would reduce reliance on trunklines and bring crude closer to refiners, potentially lowering logistics costs and improving supply efficiency.

Another proposal would allow refiners that lift crude directly from production facilities to receive a discount reflecting freight and handling costs incorporated into Brent-linked pricing but not actually incurred by the buyers.

“This could be a win-win for both the producers and refiners,” Mr Idoko said, as per Reuters.

The proposed changes come amid concerns over the cost and availability of domestic crude for Nigerian refiners. Dangote Refinery has previously said Nigeria’s pricing structure adds about $3 to $4 per barrel to its feedstock costs because crude purchases are routed through producers’ trading arms.

Analysts have identified pricing, rather than physical crude availability, as the main constraint affecting domestic crude transactions.

The reforms could help improve operations at the Dangote Refinery, Africa’s largest, which has at times faced constraints in securing sufficient crude supplies locally.

Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) released on Monday showed that producers’ compliance with the domestic crude supply framework increased to more than 90 per cent, from below 43 per cent in the previous quarter.

The regulator said the figure measures actual crude deliveries against volumes allocated by the commission, rather than the proportion of refinery demand that has been met.

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