Refinery Owners Seek Better Crude Supply to Boost Domestic Supply

Despite being one of Africa’s largest crude producers, Nigeria faces persistent challenges in supplying crude to domestic refineries on commercially viable terms, CORAN noted.

In the first quarter of 2026, 61.9 million barrels were allocated to local refineries, with producers offering 68.7 million barrels, but only 28.5 million barrels were actually delivered, according to a report released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

The association pointed to pricing gaps between producers and refiners, cited by NUPRC, as a key barrier to completed transactions. However, it acknowledged improvements in the second quarter, when NUPRC reported 53.7 million barrels of crude and condensate supplied, reflecting a 97.4% performance under the Domestic Crude Supply Obligation.

“CORAN acknowledges and commends this improvement,” the group stated but stressed that crude allocation alone is insufficient.

“A refinery does not consume an allocation on paper. It consumes crude delivered under commercially sustainable terms,” it added.

The group called for greater attention to pricing, transportation, evacuation infrastructure, crude quality, financing, payment arrangements, and proximity to production assets in supply arrangements.

The association advocated a commercially sensible pricing template, arguing that international benchmarks like Brent, WTI, and Platts should not be applied mechanically, especially when refiners bear separate evacuation and logistics costs.

It proposed a Domestic Refinery Crude Pricing Framework that factors in benchmark values, quality differentials, delivery points, avoided international freight and insurance, domestic logistics, field-to-refinery proximity, and reasonable producer margins.

“The objective is not subsidised crude. The objective is correctly priced crude,” CORAN stated.

Concerned about a resurgence in petroleum-product imports, CORAN urged the government to ensure imports only fill supply gaps.

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Citing NMDPRA data, it noted that domestic petrol supply dropped from 32.5 million litres per day in June 2026 to 25.8 million in July, while imports rose from 18.1 million to 19.7 million litres per day.

While acknowledging Nigeria’s need for adequate product stocks, the association warned that persistent imports alongside growing local refining investment could export jobs and refining margins, strain foreign exchange, deter investment, expose Nigeria to freight disruptions and geopolitical shocks, and undermine its goal of becoming a refining and export hub.

It called for import licences to be calibrated against verified domestic production gaps, with local production given market priority.

Access to finance remains a major hurdle, CORAN said, as refineries are capital-intensive, requiring investment in processing units, storage, pipelines, utilities, environmental systems, labs, fire protection, and working capital.

It urged the government to treat refineries as industrial infrastructure, noting that every barrel refined domestically retains economic value, supports employment, engineering, fabrication, transport, petrochemicals, lubricants, plastics, construction, and conserves foreign exchange.

The association envisioned a network of large, medium, and modular refineries near producing basins and consumption centres.

“The success of one refinery should not mark the completion of Nigeria’s refining ambition. Nigeria requires an ecosystem,” it stated.

It also proposed regulatory and fiscal incentives for refinery expansion, especially conversion units that boost PMS, AGO, aviation fuel, and LPG output. “Government intervention should therefore increasingly move away from subsidising consumption and toward enabling production,” CORAN said, adding, “Support the refinery. Support the pipeline. Support the storage terminal. Support access to commercially priced Nigerian crude. Support long-term industrial finance.”

CORAN urged that the focus should be on Nigeria becoming Africa’s major refining hub. “Our crude must increasingly power our refineries. Our refineries must increasingly supply our market. And Nigeria must ultimately become a refining hub for Africa. That should be the destination of petroleum-sector reform.”

To tackle these challenges, the CORAN called on the Federal Government to urgently convene a Presidential Refining Industry Roundtable involving the association, NUPRC, NMDPRA, NNPC Limited, crude producers, financial institutions, infrastructure investors, and relevant ministries.