Emmanuel Addeh in Abuja and Peter Uzoho, Sunday Ehigiator in Lagos

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has reported a significant improvement in the implementation of the Domestic Crude Supply Obligation (DCSO), with local refiners receiving 53.7 million barrels of crude oil and condensate in the second quarter of 2026, representing a 97.4 per cent performance rate.

According to data released by the Commission yesterday, the Dangote Refinery accounted for the overwhelming majority of the crude supplied to domestic refiners during the quarter.

The NUPRC said the refinery required 63 million barrels during Q2, while producers offered it 68.1 million barrels. The volume represented about 98 per cent of the total 69.3 million barrels offered to all domestic refiners during the quarter.

However, the Dangote refinery accepted 52.6 million barrels, about 77 per cent of the crude offered to it and 10.4 million barrels below its stated requirement.

Its intake also represented about 98 per cent of the 53.7 million barrels eventually supplied to local refiners during the period.

The figures showed that producers were allocated 55.1 million barrels between April and June but offered 69.3 million barrels, exceeding their allocation by 14.2 million barrels, or 25.8 per cent.

Actual supplies, however, stood at 53.7 million barrels, leaving about 15.6 million barrels of the volumes offered unutilised. Supplies were also about 1.4 million barrels below the total volume allocated by the NUPRC.

The DCSO is being enforced by the NUPRC under Section 109 of the Petroleum Industry Act (PIA), which requires oil producers to make crude available to domestic refineries.

According to the Commission, the framework is administered through monthly consultations involving crude oil producers and licensed domestic refineries, after which producers are allocated specific volumes of crude oil and condensate to offer to local refiners.

However, the eventual transactions operate under the PIA’s “willing buyer, willing seller” principle, meaning that volumes offered by producers do not necessarily translate into equivalent quantities purchased and received by refiners.

The quarterly figures also showed significant variations in performance across the three months.

In April, producers were allocated 18.13 million barrels but offered 19.31 million barrels to local refiners. Actual supplies reached 20.88 million barrels, representing 114.9 per cent performance against their allocation.

In May, 18.78 million barrels were allocated and 23.19 million barrels offered, but only 14.23 million barrels were supplied, representing 75.8 per cent compliance. This resulted in a shortfall of about 4.55 million barrels against the month’s allocation.

Performance recovered in June, when producers were allocated 18.17 million barrels and offered 26.84 million barrels to refiners. Actual supplies stood at 18.61 million barrels, representing 102.4 per cent performance.

The monthly data showed that producers consistently offered more crude than their allocated volumes, but actual deliveries were influenced by the quantities refiners were willing or able to take under the commercial arrangements.

The NUPRC said the improvement in DCSO performance coincided with an increase in local oil production and the signing of long-term crude supply agreements supported by bankable Sales and Purchase Agreements (SPAs) between producers and domestic refiners.

The development is significant for Nigeria’s refining ambitions as the country seeks to reduce its dependence on imported petroleum products by ensuring that domestic refineries have adequate crude feedstock.

The Commission said the Q2 results demonstrated that the DCSO was “actively administered and enforced”, adding that it remained committed to sustaining the recent gains.

It said it would continue leveraging the PIA framework to sustain improvements in crude oil production while enforcing the DCSO as part of efforts to achieve the Federal Government’s objective of energy sufficiency.

Meanwhile, Trade Union Congress (TUC) President, Festus Osifo, has disclosed that Nigeria’s public refineries were shut down primarily because they were operating at a financial loss, rather than non-functionality.

Osifo, who is the outgoing President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), made the disclosure yesterday, during a luncheon with members of Labour Writers Association of Nigeria (LAWAN)

He explained that although the Port Harcourt and Warri refineries had resumed some level of operations following rehabilitation, the management of the Nigerian National Petroleum Company Limited (NNPC) subsequently discovered that the value of petroleum products being produced did not justify the cost of crude being processed.

“So, the refineries were actually shut down, not that they were not functioning. Most of the old Port Harcourt Refinery, and even the Warri Refinery, were actually shut down because they were losing money,” Osifo said.

He said the refineries had suffered years of neglect, despite repeated government announcements and approvals for rehabilitation.

According to him, before 2021, there had been little or no meaningful rehabilitation of the facilities for about 15 years, despite several approvals by the Federal Executive Council (FEC).

He likened the situation to road projects that were awarded by the government but remained unexecuted because they were not adequately funded.

“There have been some erroneous impressions over the years that every time they carry out turnaround maintenance and rehabilitation in those refineries. If you interview somebody or people that have worked in Port Harcourt, Kaduna and Warri refinery 15 years before 2021, they will all tell you that they have never seen any rehabilitation or any turnaround maintenance compared to what they’ve seen from 2021,” he stated.

Osifo said significant rehabilitation work subsequently commenced in 2021, particularly at the Port Harcourt Refinery, while work was also carried out at the Warri and Kaduna facilities.

He explained that the Port Harcourt rehabilitation was comprehensive, while the Warri project was more of a quick fix because the level of degradation at the two facilities differed.

According to him, during the rehabilitation of the Port Harcourt Refinery, between 90 and 95 per cent of PENGASSAN members working at the facility were transferred to other Strategic Business Units (SBUs) of NNPCL.

He said the old Port Harcourt Refinery, built in 1965, was eventually restored to operation, while work continued on the new refinery.

Osifo explained that the old refinery could produce Automotive Gas Oil (AGO), Dual Purpose Kerosene (DPK) and aviation fuel, but could not produce Premium Motor Spirit (PMS) to the required modern specification.

He said the old facility was therefore initially feeding products into the new refinery, which was designed to meet current specifications and produce the required petrol.

However, he said the process was later altered because a critical component needed for the completion of the new refinery was expected to take about three and a half years to arrive.

The TUC president said the new management of NNPC subsequently examined the economics of the refinery using the concept of material balance in chemical engineering.

He explained that the cost of crude being fed into the refinery was not being matched by the value of the products being obtained.

According to him, the decision to shut down the facilities was therefore aimed at preventing further losses and reassessing how the refineries could operate profitably

Osifo argued that the proposed agreement between NNPC and a Chinese company could provide a more sustainable ownership and operational structure for the refineries.

He said PENGASSAN had examined the Memorandum of Understanding (MoU) between NNPC and the Chinese company and had held discussions with the Group Chief Executive Officer of NNPC on the proposed arrangement. “We think it’s actually in the right direction,” he said.

He disclosed that PENGASSAN had consistently advocated a model similar to the ownership structure of Nigeria LNG Limited (NLNG), where the government retains a minority stake while private investors hold the controlling interest.

“For us, we are advocating that because the company is about a three-in-one company, so let them buy up to 51 per cent. Let the government retain 49 per cent as it is in NLNG,” he said.

According to Osifo, private majority ownership would reduce government interference in operational and investment decisions.

He said decisions on maintenance and other business activities would no longer have to go through government processes, including federal executive council approvals.

“Because by the time Shell, ENI, Total Energy come together and make decisions, because they have 51 per cent, the project must move forward,” he said.

He added that private investors would be more likely to make decisions based on commercial considerations rather than political sentiments, while increased investment could create jobs and improve the value of the government’s remaining stake.

Osifo, who is concluding his tenure as PENGASSAN president, said one of the major objectives of his administration was to protect the jobs of members and improve their remuneration.

He said the union had achieved both objectives despite the extensive divestments that occurred in Nigeria’s oil and gas industry.

“How do we protect the job of our members and how do we enhance their pay?” he said, identifying the question as one of the fundamentals of his administration.

According to him, no PENGASSAN member lost his or her job as a direct consequence of the recent divestments involving major international oil companies.

He cited the divestments involving ExxonMobil, Shell, Eni and other international oil companies, saying the union ensured that its members’ employment and remuneration were protected throughout the transactions.

“We were able not just to protect the job of our members, but we ensured that the remuneration, we ensured that the pay of our members was not only transferred, but improved upon,” he said.

On PENGASSAN’s relationship with Dangote Refinery, Osifo said the disagreement between the union and the company had been resolved through sustained engagement.

He disclosed that about 600 workers who were disengaged by the Dangote Group during the dispute had subsequently been recalled and returned to work at the refinery.

Osifo said PENGASSAN was committed to supporting the refinery because of its importance to Nigeria’s energy security and employment generation.

“We do everything possible to protect every company that is in the space of the Nigerian oil and gas industry. Because Dangote Refinery will survive for us to have members there,” he said.

He welcomed the company’s plan to double the capacity of the refinery, saying the expansion would strengthen Nigeria’s energy security while creating additional employment opportunities.

Osifo said the relationship between PENGASSAN and the Dangote Group had now become “robust”, compared with the situation about a year earlier.

The TUC president also assessed the impact of the PIA, describing the legislation as a major reform that had delivered some important changes in the oil and gas sector.

He said PENGASSAN was initially excited when the PIA was passed in August 2021 because of its potential to transform the industry.

According to him, the creation of the upstream regulator and the midstream and downstream regulator, as well as the transformation of NNPC from a corporation into a commercially oriented company, were among the key achievements of the legislation.

He said the profitability recorded by NNPC after the PIA represented another significant development.

“20, 30, 40 years before PIA, they were always making losses. But after PIA, they started making profit. So, to that extent, you could say that there is some level of success,” he said.

He also cited the Host Community Development Trust (HCDT) and the Frontier Exploration Fund (FEF) as other areas where the PIA had made an impact.

However, Osifo said policy inconsistency remained a major challenge to the investment climate in the sector. He argued that the PIA should have been allowed to operate for at least five years before significant changes were introduced.

He expressed concern over the movement of fiscal provisions from the PIA to the Nigeria Revenue Service (NRS) legislation, saying such developments could create uncertainty for investors.

“For us, it was quite worrisome because that didn’t send the right signal to investors,” he said.

Osifo said investors needed certainty about taxes, royalties and other fiscal obligations before committing funds to long-term oil and gas projects.

“For an investor to know that I’m investing $10 million today, and this $10 million is the amount of money that I’m going to pay as taxes… investors need that certainty for them to invest,” he said.

He added that oil and gas investments often take several years before they begin to yield returns, making regulatory stability particularly important. (This Day)

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