Nigerian Refineries’ Crude Needs Jump 24% as Producers Struggle to Meet Demand

Nigerian refineries, including the massive Dangote Refinery, have increased their domestic crude oil requirements by 24% for the second half of 2024 to 597,700 barrels per day (bpd).

This is a significant uptick from the 483,000 bpd requested in the first half of the year.

The increase comes despite ongoing challenges in domestic crude supply, highlighting the widening gap between the needs of local refiners and the capacity of oil producers to meet these demands.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) revealed these figures in a statement released on Friday, noting that it had managed to secure only 177,777 bpd from oil producers during the first six months of the year.

This shortfall represents a significant challenge for the Nigerian refining sector, which is heavily reliant on steady crude supplies to maintain operations and meet the country’s energy needs.

The demand surge is largely driven by the Dangote Refinery, the largest in Africa, which has been vocal about its struggle to secure sufficient crude oil domestically.

The refinery accused the NUPRC of not adequately enforcing regulations that require oil producers to prioritize domestic refiners in their supply contracts.

As a result, the Dangote Refinery has had to increase its reliance on imported crude, raising its operational costs and potentially affecting its long-term ambitions.

“The lack of sufficient domestic crude supply is a major operational challenge for us,” the Dangote Refinery said in a statement. “The NUPRC’s lax enforcement of supply regulations is forcing us to look abroad, which significantly impacts our cost structure.”

The NUPRC, for its part, has acknowledged the challenges faced by oil producers. Some producers, the regulator explained, are grappling with operational issues, while others have already committed most of their output to international traders who financed their drilling operations.

The commission also cautioned that forcing producers to redirect more crude to local refineries could violate existing contracts, further complicating the situation.

In its statement, the NUPRC projected a national average crude oil production of 1.7 million bpd by December 2024, a slight increase from the 1.57 million bpd it forecasted for the first half of the year—a target that producers failed to meet.

The increase in crude requirements by Nigerian refineries is occurring as eight refineries, including the Dangote Refinery, are expected to be operational from August, with a combined refining capacity of 864,500 bpd.

This means that oil producers would need to supply more than half of this capacity to meet domestic refining needs.

Gbenga Komolafe, head of the NUPRC, emphasized the importance of this data in understanding Nigeria’s energy landscape for the second half of 2024.

“This comprehensive data provides insight into the projected crude oil needs for the refineries, crucial for understanding the energy landscape in Nigeria for the second half of 2024,” Komolafe said.

With 52 oil producers, including major players like TotalEnergies, Chevron, Shell, and ExxonMobil, expected to contribute to the supply, the struggle to meet the increasing demands of local refineries is set to be a critical issue in the coming months.

The situation underscores the ongoing challenges in Nigeria’s oil sector, where balancing domestic needs with international obligations remains a complex and pressing task.