While reiterating commitment to the development of the domestic crude oil market driven by willing buyer-willing seller arrangements, the Petroleum Industry Act 2021 (“PIA”) permits the imposition of Domestic Crude Oil Supply Obligations (“DCSO”) by the Nigerian Upstream Petroleum Regulatory Commission (“NUPRC” or the “Commission”) on lessees of upstream petroleum operations (“lessees”) towards enhancing local refining capacity, preventing shortages and inadequate supply, supporting strategic economic development and promoting energy security.
Both the Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“NMDPRA” or the “Authority”) are responsible for the implementation of the DCSOs. The Commission, however, has oversight responsibility for ensuring effective implementation. This is notwithstanding the Minister of Petroleum’s right of pre-emption of petroleum and petroleum products in the event of a national emergency under the First Schedule of the PIA.
The focal role of the Authority as it pertains to DCSOs is providing the Commission with the crude oil requirements for operational refineries and notifying the Commission of any shortages or inadequate supply conditions affecting local refineries on a regular basis.
On the other hand, the Commission’s responsibilities with respect to DCSOs include allocating production quotas to lessees, publishing the crude oil requirements of operational refineries as provided by the Authority and designating refineries for the sale of crude oil under the DCSO arrangement. To facilitate sales transactions between producers and local refiners, the Commission is mandated to publish crude requirements of operational refineries on its website and in 3 national newspapers for a period of six months on the 1st of January and 1st of July of each year.
