Nigeria considers crude reforms to aid local refiners

Nigeria is considering changes to its crude oil allocation and pricing rules to improve access to feedstock for local refineries, including the Dangote Refinery, the Crude Oil Refinery-owners Association of Nigeria (CORAN) said.

The proposed changes are expected to be discussed this week during a regulator-led review of the country’s domestic crude supply obligation, which requires oil producers to supply local refineries before exporting crude.

Dangote Refinery has previously said Nigeria’s pricing structure adds $3 to $4 per barrel to the cost of crude for domestic refiners because purchases are routed through producers’ trading arms. Analysts have also identified pricing as a major obstacle to domestic crude transactions.

One proposal would allow producers linked to international oil companies to deliver crude directly to nearby refineries, with the volumes reconciled later at the terminal. CORAN spokesperson Eche Idoko said this could reduce reliance on transportation infrastructure and bring crude closer to refiners.

Another proposal would allow refiners collecting crude directly from production facilities to receive discounts reflecting freight and handling costs included in Brent-linked pricing.

The proposed changes could improve operations at the 650,000-barrel-per-day Dangote Refinery, which has faced difficulties securing sufficient domestic crude supplies.

NUPRC data showed producer compliance with the domestic crude supply framework had risen above 90%, from below 43% in the previous quarter.

SOURCE: Reuters