Govt pushes domestic refining to reduce crude exports

The Federal Government has insisted that Nigeria must progressively move away from an economy that primarily exports crude oil and instead capture more value through domestic refining, petrochemicals and associated industrial activities.

The Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, stated this on Monday through his Technical Adviser on Regulation, Umar Gwandu, who represented him at the third Nigeria Oil Refining Summit organised by the Crude Oil Refiners Association of Nigeria in Lagos.

According to him, Nigeria has, for decades, produced crude oil on a significant scale while remaining heavily dependent on imported petroleum products. He said the strategic direction for Nigeria is “to progressively move from an economy that primarily exports crude to one that increasingly captures value through domestic refining, petrochemicals, and associated industrial activities”.

Lokpobiri said the Federal Government is strengthening the Domestic Supply Obligation to ensure domestic refineries have reliable access to crude, stressing that the policy is critical to the country’s energy security.

“The Domestic Supply Obligation should therefore not be viewed merely as an administrative allocation mechanism. It is an important instrument for advancing national energy security and strengthening the linkage between our upstream and downstream sectors,” he stated.

He said the Nigerian Upstream Petroleum Regulatory Commission has developed a DCSO framework in consultation with the Nigerian National Petroleum Company Limited, the Oil Producers Trade Section, the Independent Petroleum Producers Group, CORAN and other domestic refining interests.

“The Federal Government expects this framework to continue evolving from a regulatory obligation into a reliable, transparent, and commercially bankable crude supply system capable of supporting the sustainable operation of domestic refineries,” the minister said.

He further warned against situations where crude is available but cannot be commercially delivered to local refiners. “The policy challenge is therefore one of alignment, not confrontation. We must eliminate situations in which crude is theoretically available but cannot be commercially delivered to a refiner,” he stated.

The minister’s position came as the Chairman of the Crude Oil Refiners Association of Nigeria, Momoh Oyarekhua, said some domestic refineries are still struggling to access crude on commercially viable terms despite Nigeria’s abundant resources.

“Despite our abundant crude resources, some domestic refineries continue to face difficulties accessing crude oil on commercially viable terms. At the same time, fuel imports persist while local refining capacity remains underutilised,” Oyarekhua said.

In his opening remarks, Oyarekhua called for the full institutionalisation of the naira-for-crude deal, stronger enforcement of the DCSO under Section 109 of the Petroleum Industry Act and crude swap arrangements that would allow refineries located close to producing assets to access nearby crude.

Oyarekhua maintained that Nigeria should reduce petroleum-product imports progressively and restrict them increasingly to objectively determined domestic supply shortfalls and strategic-stock requirements.

“Refining for value means more than producing fuel. It means retaining foreign exchange, creating jobs, developing local expertise, supporting petrochemicals and manufacturing, and capturing greater economic value within Nigeria,” he stated.

The CORAN chairman also called for a domestic crude pricing template that takes into account crude quality and delivery points while avoiding international logistics costs and actual domestic evacuation expenses.

He urged the government to support refinery construction and expansion through long-term financing, guarantees and refinancing mechanisms, while also developing shared pipelines, depots, storage terminals, jetties, rail evacuation and other common-user infrastructure.

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Meanwhile, the Chairman of the Independent Petroleum Producers Group, Adegbite Falade, warned that Nigeria could face a major crude supply challenge as domestic refinery demand increases.

Falade, who delivered the keynote address at the summit, said domestic refineries could require more than 1.5 million barrels of crude per day in the medium term, depending on rehabilitation, expansion and the commissioning of additional modular refineries.

“Can Nigeria Reliably Feed Its Refineries? From where I stand, the answer is equally direct: geologically, yes; technically, yes; commercially and logistically, not yet there; and certainly, not by regulation alone,” he said.

He noted that Nigeria’s liquid production stood at 1.68 million barrels per day in August 2026, according to the August production report of the NUPRC.

“If domestic refinery demand rises towards 1.5 million BPD as forecasted, while crude production remains around 1.6 mbpd, the production system will have a very narrow margin for existing export commitments, government revenue requirements, crude-backed financing, joint venture partner offtake, planned and unplanned production outages, OPEC production commitments, grade mismatches, terminal and pipeline disruptions, and normal operational flexibility.

“This is why the upstream industry must be placed at the centre of the refining conversation,” he added.

Falade noted that Nigeria cannot solve the growing demand for refinery feedstock simply by redistributing existing crude production among domestic refineries. “First, we must grow the production base. Nigeria cannot refine barrels that are not produced. The answer to rising domestic refining demand is not merely to redistribute a limited pool of crude. The answer is to create more barrels,” he stressed.

The Aradel boss called for increased exploration, faster development activity, marginal-field growth, improved access to capital and measures to ensure Nigeria remains competitive for upstream investment. He also urged the government and industry to protect and modernise crude evacuation infrastructure, including pipelines, terminals, storage facilities, jetties and marine logistics.

Falade said the country needed to establish a genuine domestic crude market capable of aggregating volumes from different producers, blending grades and facilitating transparent swaps and substitutions.

“A barrel is not simply a barrel. A refinery requires the right crude grade, in the right volume, of the right quality, delivered to the right location, at the right time and under the right commercial terms,” he posited.

The IPPG chairman added that DCSO compliance had improved, citing NUPRC data which he said showed compliance rising to approximately 97.4 per cent in the second quarter of 2026 from about 41 per cent in the first quarter. He said the 34-member IPPG now accounted for more than half of Nigeria’s total oil and gas production.

“Put simply, the feedstock required to power Nigeria’s refining sector will increasingly flow from our fields and terminals. Our collective responsibility now is to ensure that our statutory policy continues to convert into commercial reality,” Falade stated.