Operators in the petroleum industry, particularly crude oil producers and managers of refineries, are to provide monthly crude oil price quotes to ensure sustainable supply of the commodity to local refineries under a market-determined pricing system.
The petroleum industry regulatory authority, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) gave the directive on Thursday to ensure that while the operators continue with their business optimally, the refineries would not be starved of the required feedstock to sustain domestic refining.
At a meeting convened by the Commission, the producers, under the umbrella of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), agreed to work within the dictates of a framework that would be mutually beneficial to all parties to ensure local refineries were not strangulated due to off-the-curve crude oil prices.
The meeting held at the instance of the Commission Chief Executive, Engr. Gbenga Komolafe, reviewed the status of the Framework for Seamless Operationalisation of Domestic Crude Oil Supply Obligation Template in the country.
“The meeting was part of efforts to effectively implement key sections of the Petroleum Industry Act (PIA) 2021, especially the issue of pricing and crude supply to the domestic refineries,” Komolafe told participants in his introductory remarks.
The CCE said President Bola Ahmed Tinubu was fully committed to providing a level playing ground for producers and refiners to do business in the industry, adding that there was need for a rule of engagement to ensure the pricing model from the oil producers did not hinder the domestic refineries.
He directed crude oil producers and refiners to provide the NUPRC with cargo price quotes on crude oil supply and delivery for effective monitoring and regulation of transactions among parties.
“We need to have the price quotes monthly,” he directed.
The CCE underlined the need for a convergence between the Domestic Crude Oil Supply Obligation (DCOSO) and the nation’s energy security policy, indicating that his team was re-engineering its regulatory processes to address the identified challenges.
“We allow all our processes to be transparent. While the Federal Government targets the implementation of the regulation, all parties must submit to the rules of engagement as a guide for operation,” he said.
The regulator, he said, was committed to driving the willing buyer/willing seller provision by discussing pricing, especially as parties have committed to respecting their domestic crude oil obligations.
As the regulator, he said the Commission would not want the upstream sector to be operated sub-optimally through cost under-recovery as the regulator was very alive to its mandate and responsibility to ensure adequate monitoring and enforcement of established operational regularions.
Under crude oil pricing, the CCE said the Commission would never allow price strangulation to discourage the country’s domestic refining capacity optimisation.
The regulator, said the Commission would not support cost under-recovery in the upstream sector, as it would continue to work to ensure that crude supply profiteering as a negative factor that could strangulate domestic refining capacity optimisation was not allowed. The NUPRC emphasised the imperative for appropriate pricing to drive willing-buyer willing-seller referencing guided Fiscal Oil Price (FOP) published by the Commission in line with the provisions of the PIA.
“The NUPRC is committed to attracting the needed investments to boost upstream development and optimisation of our hydrocarbon resources, just as we want sustainability of domestic energy supply in the midstream and downstream sector,” the CCE said.
