Dear Readers,
Nigeria’s refining sector is poised for expansion as the Federal Government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), has approved licenses for the construction of three new refineries. These facilities are expected to add 140,000 barrels per day (bpd) to the country’s domestic refining capacity.
The newly licensed refineries include:
- Eghudu Refinery Ltd (Edo State) – 100,000 bpd
- MB Refinery and Petrochemicals Company Ltd (Delta State) – 30,000 bpd
- HIS Refining and Petrochemical Company Ltd (Abia State) – 10,000 bpd
Earlier this year, a 10,000 bpd refinery license was also approved for MRO Energy Limited in Delta State, bringing Nigeria’s total number of modular refineries to 14.
While these approvals indicate progress, a fundamental challenge remains, many existing refineries are either non-operational or operating below capacity. At the heart of this problem is crude oil allocation. Local refiners have accused crude producers of prioritizing exports over meeting domestic demand, while regulators are criticized for issuing more fuel import licenses rather than ensuring steady crude supply to Nigerian refineries. The issue has escalated to the courts, with Dangote Refinery seeking N100 billion in damages against NMDPRA for allegedly breaching the Petroleum Industry Act (PIA) by issuing import licenses despite sufficient domestic production. Click here to read our full article on the Dangote case.
The Crude Oil Refinery Owners Association of Nigeria (CORAN) has decried the lack of crude supply, stating that local refiners have received zero allocation as required under the Domestic Crude Oil Supply Obligation (DCSO) framework. In response, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) recently banned the export of crude meant for domestic refining, emphasizing that such diversions violate the law. Under Section 109 of the Petroleum Industry Act (PIA) 2021, the DCSO was designed to enhance domestic refining capacity and ensure energy security, yet reports indicate that 500,000 bpd of crude meant for local refineries is diverted to the international market.
To address these shortages, NMDPRA must regularly update NUPRC on refinery crude requirements and report any supply gaps. In turn, NUPRC has introduced a Request for Quotations (RFQ) system to facilitate crude sales between producers and refiners. This market-driven approach enables negotiations on a willing buyer, willing seller basis but does not impose mandatory supply obligations where a refiner’s actions are deemed unreasonable. Additionally, NUPRC considers existing supply contracts, crude export commitments, and production quotas before enforcing any supply obligations on producers. Click here to read our full article on DCSO
The scale of the challenge is significant. The numbers highlight the urgency of the issue. According to the NUPRC, Nigeria’s eight operational refineries, including Dangote, will require 770,500 barrels of crude per day in the first half of 2025, approximately 37% of Nigeria’s projected daily crude production (2,066,940 bpd). Without a steady and reliable crude supply, the country’s refining ambitions may remain largely theoretical, perpetuating its reliance on imported petroleum products.
A Path Forward?
With new refineries under development and regulatory interventions to curb crude exports, Nigeria has a unique opportunity to finally establish a thriving domestic refining sector and break free from its reliance on imported petroleum products.
However, critical questions remain:
- Will these new projects translate into real production, or will they become yet another addition to the long list of underutilized refineries?
- What bold policy changes are required to guarantee crude supply for refineries while protecting the rights of producers, ensuring these investments lead to a fully functional domestic refining industry?
- Is Nigeria truly ready to prioritize its refining sector, or will crude supply constraints continue to undermine progress?
The answer to these questions will define the future of Nigeria’s energy independence and determine whether its refining sector can move beyond policy intent to real, sustainable production.
PLEASE NOTE THAT THIS BLOG POST IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.
