IOCs accused of bypassing local refining sector despite laws mandating domestic supply
Despite mounting investment in domestic refining capacity, Nigeria’s oil industry remains mired in contradictions as international oil companies (IOCs) continue to sidestep local refineries — even as over 60 million barrels of Nigerian crude oil lie stranded and unsold on the high seas.
At the heart of this impasse is the failure to implement the Domestic Crude Supply Obligations (DCSO) enshrined in the Petroleum Industry Act (PIA). Instead of prioritising Nigerian refineries, IOCs are reportedly selling to foreign traders who later resell the same crude back to Nigeria — often at premiums of $5–$6 per barrel above global market rates.
This dynamic has not only priced local refiners out of the market, but also undermined the viability of Nigeria’s refining revolution, threatening projects worth billions of dollars, including the 650,000 barrels-per-day Dangote Refinery.
A Legal Framework Ignored
Sections 8(c) and 109 of the PIA mandate crude oil producers to meet domestic refining needs before exporting. But according to industry documents and analyst reports, compliance has been poor, with many producers favoring international markets in regions such as the Far East and Southern Africa.
“The practice is exploitative and designed to keep Nigeria dependent on fuel imports,” said public affairs analyst Bimbo Oyarinu. “Local refineries are bidding for crude but are consistently ignored.”
Regulatory Inertia
While the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has issued warnings — including a February 2, 2025 letter from CEO Gbenga Komolafe threatening to withhold export permits for diverted crude — enforcement remains weak.
Industry insiders accuse the Commission of favoring backdoor negotiations over transparent regulation. “The IOCs are operating with impunity, and the regulator is enabling it by not imposing sanctions,” said a senior oil sector analyst.
Refineries Left Idle
Refineries across the country are already feeling the impact. According to the Crude Oil Refinery-owners Association of Nigeria (CORAN), at least seven modular refineries have stalled due to crude shortages. Refineries such as the Edo Refinery, which plans a major expansion, are now seeking crude from U.S. suppliers just to survive.
“Some of our members haven’t refined a single litre in over six months,” said Eche Idoko, CORAN’s National Publicity Secretary. “We can’t reach Final Investment Decision (FID) without guaranteed feedstock.”
Only a few like Walter Smith Refinery and Aradel Energy, which rely on their own marginal fields, have been able to operate intermittently.
A Costly Paradox
In a deeply ironic twist, Nigerian refineries — located in a country with one of Africa’s largest oil reserves — are now importing crude. A recent estimate suggests that domestic refiners could spend $8.56 billion to import approximately 122.4 million barrels of crude over the next six months.
That equates to a staggering $1.43 billion per month, further straining foreign exchange reserves amid a broader economic slowdown.
The Bigger Picture
Energy expert Dan Kunle in an interview with LEADERSHIP, attributes the rise in floating crude cargoes partly to falling global oil prices, which have triggered disputes between buyers and sellers over price benchmarks. However, Kunle insists that a strategic shift is needed: “Nigeria has the capacity and infrastructure. The issue is political will and transparency.”
A Call to Action
Stakeholders are calling for immediate action from both the federal government and the NUPRC. “Nigeria is in an economic paradox — rich in resources, yet paying premiums to access them,” said Oyarinu. “The law is clear. What’s missing is the courage to enforce it.”
As global oil dynamics evolve and competition intensifies, Nigeria’s window to correct course is narrowing. The stranded oil floating off its coasts is more than a market inefficiency — it’s a metaphor for missed opportunities and a system in need of reform.