Nigeria Cuts Deal with Producers to Supply Oil to Refiners at Market Price

On July 13, 2024, 3:25 AM

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reached an agreement with oil producers to supply crude oil to domestic refineries at market prices on Wednesday, ending a supply dispute that had strained relations with international oil companies. 

Nigeria imports most of its fuel needs due to inadequate refining capacity, although a 650,000 barrel-a-day refinery built by Africa’s richest man Aliko Dangote, and operational since February, should produce more than enough for the country’s needs. Earlier, Dangote Refinery complained that oil majors were hindering local crude purchases by demanding excessive premiums or saying they had no available supplies.

NUPRC said in a statement it could not allow pricing to impede domestic refining, “We will never allow price strangulation to disincentivize our domestic refining capacity optimization.”

The oil and gas multinational divestment from the Niger Delta that kicked off over a decade has hit a peak.  Numerous oil and gas majors have exited the Nigerian market over the past few years despite Africa’s largest economy opening its doors for wider exploration courtesy of the Petroleum Industry Act (PIA) 2021.

Last November, Norwegian oil and gas giant Equinor ASA (NYSE:EQNR) finalized the sale of Equinor Nigeria Energy Company (ENEC) to local firm, Chappal Energy. The sale brought to a close the company’s three-decade-long partnership with Africa’s largest oil producer, during which Equinor pumped more than a billion barrels of crude from the Agbami Field. Prior to that, Chinese company Addax sold its four oil blocks to Nigerian state oil company, NNPC while Italian energy multinational Eni S.p.A.(NYSE:E) announced plans to sell its onshore operations to local entity Oando.

Additionally, U.S. oil and gas supermajor Exxon Mobil Corp. (NYSE:XOM) announced plans to sell its equity interest in Mobil Producing Nigeria Unlimited, which holds more than 90 shallow-water and onshore platforms as well as 300 producing wells, toSeplat Energy Plc. for approximately $1.3 billion.

But the most dramatic divestment drive in the Niger Delta has been by Anglo-Dutch supermajor Shell Plc (NYSE:SHEL). During last year’s report, Shell revealed it had already sold 50% of its Nigerian oil assets. In April 2022, Shell confirmed it was selling its interest in several onshore and shallow water fields, producing over 20,000 barrels of oil equivalent per day.