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The Nigerian National Petroleum Corporation Limited (NNPCL) exchanges crude oil worth N2.6 trillion for refined petroleum products.

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In 2021, the Nigerian National Petroleum Company Limited (NNPCL) conducted crude oil exchanges valued at N2.6 trillion for refined petroleum products, according to the latest data from the Nigeria Extractive Industries Transparency Initiative (NEITI), a federal government agency.

An analysis of crude oil production figures from NEITI’s 2021 Oil and Gas Report revealed that during this period, the national oil company did not supply any crude oil to Nigeria’s domestic refineries. NEITI suggested that this lack of supply to domestic refineries could be attributed to their non-operational status, although rehabilitation efforts were underway.

The NEITI report clarified that the exchange of Nigeria’s crude oil for refined products occurred through the Direct Sale Direct Purchase (DSDP) program. It also noted that crude oil sales receipts during the same period amounted to N2.23 trillion.

Under the DSDP program, initiated in 2016, selected overseas refiners, trading companies, and indigenous firms are allocated crude oil supplies in exchange for providing an equivalent value of petrol and other refined products to NNPCL.

NEITI’s report further highlighted, “NNPC allocated a total of 98.92 million barrels of crude oil valued at $7.11 billion (N2.73 trillion) for the local market in 2021. However, no crude was delivered to any of the local refineries in 2021. Instead, NNPC used 95.25 percent of this crude for crude exchange for products at the international market under the DSDP arrangement, while 4.75 percent was sold at the international market.”

The report pointed out that the non-delivery to domestic refineries was possibly due to their lack of operation in 2021. It also revealed that out of the N2.23 trillion ($5.85 billion) in actual domestic crude sales receipts in 2021, N1.64 trillion ($4.30 billion) represented sales for that year, while N588.68 billion ($1.55 billion) was used to settle prior year receivables.

Additionally, the report disclosed that NNPCL, on behalf of the Federation, lifted and exported a total of 24.84 million barrels of crude oil valued at $1.70 billion in 2021. The actual sales receipt for 2021 amounted to $1.58 billion, with $1.55 billion attributed to sales for that year and $24.32 million linked to prior year receivables.

Let refineries work

Downstream sector stakeholders have consistently urged the Federal Government to accelerate efforts in revitalizing Nigeria’s refineries for domestic crude oil processing. Their argument centers on the potential benefits, including alleviating pressure on the naira, discontinuing the Direct Sale Direct Purchase (DSDP) arrangement, and ensuring a sustainable supply of refined petroleum products within the country.

Chief Chinedu Ukadike, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, emphasized the importance of refurbishing the refineries. He explained that functional refineries would reduce the naira’s depreciation against the dollar since the demand for dollars by marketers would decrease.

Ukadike further elaborated, “Similarly, we will not need this DSDP arrangement because we will refine our products locally in Nigeria, eliminating the need to exchange our crude with foreign companies. Therefore, the revival of our refineries plays a crucial role in addressing challenges in the downstream oil sector, especially regarding the supply of refined petroleum products.”

He also stressed the long-overdue emergence of functional modular refineries, suggesting that the government should provide support to modular refinery operators to reduce dependence on imported petroleum products. He highlighted that reduced subsidies should encourage their development, enabling many of them to refine crude oil in the near future.

Mrs. Dolapo Kotun, Deputy Chairman of the Crude Oil Refinery Owners Association of Nigeria (CORAN), echoed the viability of modular refineries, even in light of the upcoming Dangote Refinery, which is expected to produce 650,000 barrels of crude daily. CORAN represents both modular and conventional refinery companies in Nigeria.

Kotun, who also serves as the Executive Director of Operations at Ikwe-Onna Refinery Ltd and Chairperson of Downstream Women in Energy, Oil, and Gas, emphasized that modular refineries are vital for securing Nigeria’s energy needs. Unlike a single large refinery, modular refineries are distributed across multiple sites in the Niger Delta region, allowing them to promptly supply high-quality refined petroleum products to local markets in their respective locations.

She noted, “Dangote’s capacity alone cannot fulfill Nigeria’s current demand for refined products, and uncertainties surround its production start date despite being ‘commissioned’.”

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