The Nigerian government plans to reduce crude oil supply to Dangote Refinery from 300,000 barrels per day due to the onstreaming of Warri and Port Harcourt refineries. This move is part of the Naira-for-Crude initiative, aimed at increasing local refining capacity and competition in the downstream sector.
The Nigerian National Petroleum Corporation Limited (NNPCL) is contemplating a reduction in crude oil supply to the Dangote Petroleum Refinery. Currently receiving 300,000 barrels per day (bpd) from the government, this allocation may be cut unless Nigeria sees an uptick in oil production. This change is tied to adjustments in the government’s naira-for-crude initiative following the reactivation of the Warri and Port Harcourt refineries.
The Warri and Port Harcourt refineries, which have a combined capacity of around 135,000 bpd, have recently resumed operations after years of dormancy. The government, under the naira-for-crude agreement, plans to ensure a sufficient supply of crude to all domestic refineries, which is expected to boost competition in the sector. Before this, the NNPCL allocated about 445,000 barrels per day to local refineries, including Dangote’s plant.
According to Punch Newspapers, Government sources confirmed that the crude allocation to the Dangote refinery could decrease as the Warri and Port Harcourt refineries ramp up production. A crucial aspect of this shift is the emphasis on increasing oil production in the country to maintain a balanced supply across all refineries.
Additionally, there’s growing concern that the new supply formula could affect refinery operations, with the Dangote refinery potentially turning to crude imports, which would be subject to international prices. Industry insiders argue that the resolution to the issue lies in ramping up local oil production, which the government is actively pursuing.
Industry stakeholders, including the Crude Oil Refinery Owners Association of Nigeria (CORAN), have expressed concerns about the potential impact on refinery operations. CORAN’s Publicity Secretary, Eche Idoko, emphasized that the focus of the naira-for-crude initiative was primarily to stabilize the foreign exchange market, not just the crude supply.
