The Nigerian Upstream Petroleum Regulatory Commission has revealed that several oil producers resisted government directives last year to allocate part of their crude output to local refineries, including the Dangote Refinery.

According to the commission’s report, the companies cited various reasons for their refusal and submitted formal letters either seeking waivers or explaining why they could not meet the crude volumes assigned under the Domestic Crude Supply Obligation.

Despite efforts by the regulator to enforce compliance, resistance from producers posed a significant challenge to meeting domestic supply targets.

Despite several engagements and the formal gazetting of the Production Curtailment and Domestic Crude Supply Obligation Regulations in September 2023, the resistance reportedly persisted.

“Several pushbacks from IPPG (Independent Petroleum Producers Group), OPTS (Oil Producers Trade Section), some producers and their equity partners were received via formal letters, either requesting for waivers on the allocated monthly obligations or giving detailed explanations why they might not be able to meet up with the allocated volumes,” the report stated.

To implement its strategy, the commission used the monthly production curtailment platform in February 2024 to channel crude oil to the Dangote Refinery and other local refiners. It also introduced several measures to enforce compliance with the Domestic Crude Supply Obligations, as outlined in the Petroleum Industry Act.

The NUPRC noted that it had written to all exploration and production companies, asking them to submit copies of existing crude sales and purchase agreements that could influence the supply of crude to the domestic market.

It added that a series of industry-wide engagements were held to sensitise key stakeholders — including exploration and production companies, operators, equity holders, and refinery owners — on the requirements of the Domestic Crude Supply Obligations.

The commission also disclosed that in March 2023, it set up a working committee made up of its officials and representatives from the Oil Producers Trade Section, Independent Petroleum Producers Group, Crude Oil Refinery-Owners Association of Nigeria, and NNPC Upstream Investment Management Services.

The committee was tasked with developing a comprehensive framework to address critical issues that could hinder the effective implementation of the DCSO policy.

The commission also developed a set of metrics that consider each producer’s functional capacity—past performance, current output, and future projections—before assigning daily crude supply obligations. These obligations are to be communicated to producers on a bi-annual basis.

The DCSO guidelines, based on an operational template jointly developed with industry stakeholders, were officially approved by NUPRC Chief Executive, Gbenga Komolafe, on July 11, 2024.

“All Companies with the forecasted ability to produce more than 3,000 barrels per day were issued their domestic monthly obligations for the rest of the year on July 31, 2024,” the commission said.

However, the move faced resistance, with the Independent Petroleum Producers Group, Oil Producers Trade Section, several producers, and their equity partners submitting formal letters in August.

These letters either sought waivers from the assigned monthly obligations or provided detailed justifications for their inability to meet the allocated volumes.

It was also revealed that producers objected to the participation of refinery representatives at the production curtailment meetings.

In response, a letter was issued in September formally withdrawing the refiners’ invitation to the meeting.

“Following several complaints from operators about the presence of refiners at curtailment meetings, another letter was sent to refiners, notifying them of the commission’s decision to put all refiners’ attendance at the monthly Production Curtailment Meeting on hold temporarily till further notice,” it was said.