REFINERY OPERATORS ASK FG TO PRIORITISE LOCAL PRODUCTION OVER RISING FUEL IMPORTS

The Crude Oil Refinery Owners Association of Nigeria has called on the Federal Government to take stronger measures to protect and develop Nigeria’s domestic refining industry, warning that continued reliance on imported petroleum products could undermine investments being made in local refineries.

In a position paper titled “Position Paper on the Urgent Need for Strategic Government Intervention to Strengthen Nigeria’s Domestic Refining Industry,” the association argued that Nigeria needs deliberate government intervention to build a sustainable refining sector and reduce the country’s exposure to foreign exchange pressures, international supply disruptions and other external shocks.

The association pointed to the United States as an example of a major oil-producing economy intervening to support its refining industry, arguing that Nigeria has an even stronger reason to pursue similar strategic measures. According to the group, domestic refiners continue to face several obstacles, including expensive financing, limited access to long-term credit, difficulties obtaining crude, inadequate infrastructure, logistics challenges and foreign-exchange constraints.

CORAN also raised concerns about the gap between crude allocated or offered to Nigerian refineries and the volumes actually delivered. It said that during the first quarter of 2026, about 61.9 million barrels were allocated to domestic refineries, while producers offered 68.7 million barrels. However, only 28.5 million barrels were ultimately delivered to the refineries.

The association attributed part of the problem to disagreements over crude pricing. It noted that the Nigerian Upstream Petroleum Regulatory Commission had identified pricing differences between crude producers and domestic refiners as one of the factors preventing offered crude from translating into completed transactions.

There was, however, an improvement in the second quarter, according to CORAN. The association said NUPRC reported that 53.7 million barrels of crude oil and condensate were supplied to domestic refineries during the period, representing a reported 97.4 per cent performance of the Domestic Crude Supply Obligation. CORAN commended the improvement but stressed that simply allocating crude does not solve the problem if the commodity cannot be delivered on commercially workable terms.

To address the issue, the refinery owners called for a more comprehensive domestic crude pricing framework. They argued that international benchmarks such as Brent, WTI and Platts should remain reference points but should not be applied without considering the additional costs domestic refiners incur in transporting and receiving crude.

The proposed framework, according to CORAN, should take into account the international crude benchmark, crude quality, the actual delivery point, international freight and insurance costs that are avoided through domestic supply, domestic transportation and evacuation expenses, the proximity of producing fields to refineries and reasonable commercial margins for producers.

The association said the objective was not to obtain subsidised crude but to ensure that Nigerian refineries have access to crude at commercially sustainable prices. It also called for factors such as payment arrangements, crude quality and infrastructure availability to be incorporated into supply agreements.

CORAN further expressed concern over the renewed increase in petroleum-product imports at a time when Nigeria is seeking to expand domestic refining capacity. It cited data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority showing that domestic PMS supply dropped from about 32.5 million litres per day in June 2026 to 25.8 million litres per day in July, while petrol imports increased from approximately 18.1 million litres to 19.7 million litres per day.

While acknowledging that imports may be necessary to prevent shortages, the refinery owners warned against allowing imports to become a permanent substitute for domestic production. They argued that an import-heavy market operating alongside significant investment in Nigerian refineries could discourage further investment and place additional pressure on the country's foreign exchange resources.

CORAN said persistent dependence on imported petroleum products could also result in Nigerian jobs and refining margins being created outside the country. It added that international freight disruptions and geopolitical developments could expose Nigeria to additional supply risks if domestic production remains inadequate.

The association therefore proposed that import licences should increasingly reflect independently verified domestic production and actual supply shortfalls. Where Nigerian refineries can produce petroleum products that meet the required quality and commercial specifications, CORAN said such domestic production should receive priority in the local market.

Financing was also identified as one of the major challenges confronting emerging refiners. CORAN noted that refinery projects require substantial capital for processing equipment, storage facilities, pipelines, loading infrastructure, utilities, environmental systems, laboratories, fire-protection facilities and working capital.

The group urged the Federal Government to view refineries as critical industrial infrastructure rather than treating them only as downstream petroleum businesses. It argued that increasing local refining would help retain more economic value within Nigeria while supporting employment and related industries, including engineering, fabrication, transportation, petrochemicals, construction and manufacturing.

CORAN also advocated the development of a network comprising large-scale, medium-sized and modular refineries located strategically around crude-producing areas and major centres of petroleum-product consumption. According to the association, strengthening one or two facilities would not be enough to achieve national energy security and Nigeria needs a broader refining ecosystem.

To coordinate the response, the refinery owners called for an urgent Presidential Refining Industry Roundtable involving refinery operators, NUPRC, NMDPRA, NNPC Limited, crude producers, financial institutions, infrastructure investors and relevant government ministries.

Among its proposed measures, CORAN wants the Federal Government to institutionalise naira-for-crude transactions, establish a domestic crude pricing template, strengthen enforcement of the Domestic Crude Supply Obligation under Section 109 of the Petroleum Industry Act and expand the use of crude swaps.

The association also proposed a dedicated financing framework for refinery development, shared petroleum-product infrastructure, strategic petroleum reserves and fiscal and regulatory incentives for refinery expansion. It particularly encouraged investment in conversion units that could increase the domestic production of petrol, diesel, aviation fuel and LPG.

CORAN said government policy should increasingly focus on supporting production rather than subsidising consumption, arguing that a stronger domestic refining industry would reduce foreign-exchange pressure, create jobs and strengthen Nigeria's energy security.

The association ultimately wants Nigeria to evolve from a country that exports crude oil while importing refined petroleum products into a major refining centre capable of meeting domestic demand and supplying other African markets.