Nigeria weighs crude supply changes to ease refinery feedstock costs

Nigeria is considering changes to crude allocation and pricing rules to improve feedstock access for its domestic refiners, including the Dangote Refinery, according to the Crude Oil Refinery-owners Association of Nigeria (CORAN).

The proposed reforms come as Dangote, Africa's largest refinery with a capacity of 650,000 barrels per day, has at times struggled to secure sufficient crude supplies domestically. The company has previously said that Nigeria's pricing structure adds $3 to $4 per barrel to feedstock costs because purchases are routed through producers' trading arms.

Analysts say the main challenge in domestic crude transactions is pricing rather than physical availability. The proposed changes are expected to be discussed this week during a regulator-led review of Nigeria's domestic crude supply obligation, which requires producers to supply local refiners before exporting.

CORAN spokesperson Eche Idoko outlined two proposals under consideration. The first would allow a producer linked to an international oil company's network to deliver crude directly to a nearby refinery, with volumes reconciled later at the terminal. This would reduce reliance on trunklines and bring crude closer to refiners.

The second proposal would allow refiners that lift crude directly from production facilities to receive a discount reflecting freight and handling costs embedded in Brent-linked pricing but not actually incurred by them. Idoko described this as a potential win-win for both producers and refiners.

Data released on Monday by the Nigerian Upstream Regulatory Commission (NUPRC) showed producer compliance with the domestic crude supply framework rose to over 90% from less than 43% in the previous quarter. The metric tracks actual deliveries against volumes allocated by the regulator, not refinery demand met. Under the scheme, producers must offer allocated volumes to local refineries, with sales agreed on a 'willing-buyer, willing-seller' basis.

A NUPRC official said the ideas are on the table largely at the urging of inland refiners, but implementation would require addressing crude quality differences and pricing adjustments.