Nigerian regulator plots oil exchange scheme to increase fuel production capacity

The Nigerian Upstream Petroleum Regulatory Commission has initiated consultations with key industry stakeholders to introduce a domestic crude oil and gas swap arrangement, aimed at reducing supply costs and increasing the availability of crude for Nigerian refineries, while also strengthening compliance with the Domestic Crude Supply Obligation and Domestic Gas Supply Obligation.

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This move is expected to minimize the need for lengthy crude transportation, thereby streamlining the supply process, according to NUPRC Chief Executive Oritsemeyiwa Eyesan, who made the announcement during a visit to the Nigerian Midstream and Downstream Petroleum Regulatory Authority in Abuja on Thursday.

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As part of the proposed arrangement, producers and refiners will be able to optimize their existing logistics and supply networks, with the commission currently consulting relevant stakeholders to develop the scheme's modalities, which will also involve the Gas Aggregation Company Nigeria Limited, as disclosed by NUPRC Head of Media and Corporate Communications Eniola Akinkuotu in a statement on Friday.

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The swap arrangement will enable crude producers with export facilities to meet the obligations of producers closer to domestic refineries, eliminating the need for unnecessary crude transportation across the country, and allowing for a more efficient allocation of resources, as explained by Eyesan.

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According to Eyesan, the proposed swap arrangement will work by allowing producers to meet their obligations through a swap mechanism, rather than physically transporting crude, with the commission aiming to finalize the modalities and improve compliance with the Domestic Crude Supply Obligation and the Domestic Gas Supply Obligation once the scheme is implemented.

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The proposal comes as NUPRC data shows a significant improvement in crude deliveries to domestic refiners, with 53.7 million barrels of crude oil supplied to local refiners between April and June 2026, representing a 97.4 per cent performance under the DCSO during the second quarter, despite which crude oil imports into the country have continued.

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Refiners have reportedly complained about the high prices of locally supplied crude, making it more expensive for them to source Nigerian crude than imported alternatives, which has undermined the competitiveness of domestic refining, prompting the commission to explore more efficient mechanisms for allocating and delivering domestic crude to refineries, as noted by Eyesan.

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Eyesan stressed that discussions on the crude oil swap are still in the early stages, and all necessary modalities must be agreed upon before implementation, while also pledging to strengthen collaboration with the NMDPRA to address challenges across the petroleum value chain.

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In response, NMDPRA Chief Executive Rabiu Abdullahi Umar congratulated the upstream commission on the successful 2025 licensing round and commended the NUPRC for improving enforcement of domestic crude supply to local refineries, which he said is crucial to the growth of Nigeria's refining industry.

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Umar noted that pricing remains a major consideration in domestic crude transactions, and although the Petroleum Industry Act allows for transactions to be conducted on a willing-buyer, willing-seller basis, the price of crude is critical to the viability of domestic refining, with the NMDPRA expressing support for the establishment of strategic petroleum reserves to strengthen Nigeria's energy security and contribute to price stability.

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The proposed crude swap arrangement is part of ongoing efforts by regulators to ensure that increasing domestic refining capacity is matched by reliable and competitively priced crude supplies, with regulators facing growing pressure to ensure that domestic crude supply obligations translate into actual feedstock availability for local refiners, particularly with the Dangote Petroleum Refinery and other private refineries expanding operations.