The Federal Government has acceded to the demands of domestic crude oil refiners and other operators in the sector.
On Monday, it announced that indigenous refineries would now have the choice to buy crude oil using either the Nigerian naira or the US dollar.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) disclosed this information during a press briefing in Abuja, where it unveiled a new template for domestic crude oil supply obligations. According to the NUPRC, Nigeria’s total crude oil and condensate reserves had increased to 37.5 billion barrels as of January 1, 2024, with a calculated life index of 68.01 years.
Gbenga Komolafe, the Chief Executive of NUPRC, explained that the commission, in collaboration with stakeholders such as NNPC Upstream Investment Management Services, representatives of crude oil and condensate producers, the Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery, had devised the template to ensure a smooth implementation of the Domestic Crude Oil Supply Obligation (DCSO). The aim was to facilitate a consistent supply of crude oil to domestic refineries.
Responding to a query regarding the currency of transaction, Komolafe clarified that the payment could be made in either naira or dollars, emphasizing that naira transactions would alleviate pressure on the country’s foreign exchange rate. He also highlighted that the implementation of the template would be uncomplicated for all parties involved, aligning with the provisions of the Petroleum Industry Act (PIA) to foster the development of the midstream sector.
Previously, modular refineries in Nigeria were facing potential operational shutdowns due to difficulties in accessing foreign exchange for the purchase of crude oil, which is priced in US dollars. The scarcity of dollars made it challenging for these refineries to procure crude oil, hindering the availability of refined products for distribution to consumers. The Crude Oil Refinery Owners Association of Nigeria had expressed concerns over the situation, urging the government to sell crude oil in naira to ease pressure on the currency and make diesel more affordable.
During the briefing, the government also announced an increase in Nigeria’s crude oil and condensate reserves to 37.5 billion barrels and gas reserves to 209.26 trillion cubic feet as of January 1, 2024. Komolafe highlighted that these figures demonstrated the country’s substantial oil and gas potential, with Nigeria possessing 33% of Africa’s gas reserves.
As Nigeria continues to explore frontier basins, such as the Anambra Basin, Benue trough, Bida basin, Chad basin (Nigerian section), Dahomey basin, Sokoto basin, Deep, and Ultra-deep offshore Niger Delta, there is hope that these endeavors will contribute to increased oil production and economic growth. However, there are ongoing debates regarding exploration expenditure and the equitable distribution of benefits.
The latest developments regarding the option to purchase crude oil in naira or dollars, along with the significant reserves, signify promising prospects for Nigeria’s oil and gas industry.
