FG Bans Crude Oil Export To Boost Domestic Refining & Energy Security

Boosting Local Refining and Strengthening Energy Security

The Federal Government of Nigeria has officially banned the export of crude oil allocated for domestic refineries. This move aims to enhance the country’s refining capacity, minimize reliance on imported petroleum products, and reduce pressure on foreign exchange reserves.

Previously, about 500,000 barrels per day meant for local refining were illegally sold on the international market, as producers and traders exploited the system for quick foreign exchange earnings. To curb this practice, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has announced that it will no longer issue export permits for crude oil designated for domestic refineries.

Strict Regulatory Measures to Ensure Compliance

The commission emphasized that any alterations to cargoes designated for local refining require explicit approval from the Chief Executive Officer of NUPRC.

In a February 2, 2025, directive, addressed to oil producers and exploration companies, NUPRC CEO, Engr. Gbenga Komolafe, reiterated that diverting crude meant for Nigerian refineries violates the Petroleum Industry Act (PIA) 2021.

During a recent meeting with over 50 key industry stakeholders, including refiners and producers, both sides blamed each other for inconsistencies in implementing the Domestic Crude Supply Obligation (DCSO) policy. Refiners claimed that producers prioritized foreign markets over local supply, while producers argued that refiners failed to meet commercial and operational agreements, forcing them to seek alternative buyers.

The regulator, however, has introduced new measures to enforce compliance, warning both parties against further violations. Producers must adhere strictly to the DCSO policy and obtain approval before diverting any crude oil originally intended for local use.

Legal Framework and Enforcement Actions

Under Section 109 of the Petroleum Industry Act (PIA) 2021, the government aims to ensure a stable supply of crude oil to domestic refineries while reinforcing Nigeria’s energy security.

To enforce this regulation, NUPRC has implemented the following:

Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023
Creation of the DCSO framework and implementation guide
Strict monitoring of crude oil allocations to refineries

This initiative aligns with Nigeria’s Naira-for-Crude programme, which ensures that refineries purchase crude oil in naira and sell refined petroleum products in local currency.

Domestic Refining Demand Reaches 770,500 Barrels Per Day

According to NUPRC’s latest report, Nigeria’s major refineries require a total of 770,500 barrels per day (bpd) in the first half of 2025. These include:

Dangote Refinery – 550,000 bpd
Port Harcourt Refinery – 60,000 bpd
Warri Refinery – 125,000 bpd
Kaduna Refinery – 110,000 bpd
OPAC Refinery (Delta State) – 10,000 bpd
WalterSmith Refinery (Imo State) – 5,000 bpd
Duport Midstream (Edo State) – 2,500 bpd
Edo Refinery (Edo State) – 1,500 bpd
Aradel Refinery (Rivers State) – 11,000 bpd

This 770,500 bpd allocation represents 37% of the forecasted first-half 2025 daily crude production of 2.07 million barrels. International Oil Companies (IOCs) and independent producers, including Shell, Chevron, and Seplat Energy, will supply the required crude.

NUPRC’s Project One Million Barrels, launched in October 2024, has significantly boosted the country’s crude production, ensuring enough supply for both domestic use and exports.

Nigeria’s Oil Production Sees a 7.38% Increase

Nigeria’s daily average oil production rose by 7.38% year-on-year in December 2024, reaching 1.667 million barrels per day (mbpd) from 1.552 mbpd in December 2023.

However, the December 2024 output dropped 1.35% month-on-month, from 1.69 mbpd in November 2024 to 1.667 mbpd.

Data from NUPRC showed that in December 2024, the highest crude oil production was recorded at:

Forcados Terminal – 8.49 million barrels
Bonny Terminal – 7.78 million barrels
Qua Iboe Terminal – 4.15 million barrels

Despite these improvements, Nigeria still failed to meet its 1.7 mbpd benchmark for the 2024 national budget and OPEC’s 1.5 mbpd quota.

NNPCL Backs Domestic Refining Policy

Reacting to the crude allocation policy, NNPC Limited’s Chief Corporate Communications Officer, Mr. Femi Soneye, reaffirmed the government’s commitment to enhancing domestic refining capacity and reducing fuel imports.

Under the Petroleum Industry Act (PIA) 2021, oil producers are required to prioritize domestic crude supply before exporting the excess. These measures are designed to:

Strengthen national energy security
Reduce reliance on imported petroleum products
Stabilize the foreign exchange market

Experts Applaud Move, Call for Effective Implementation

Experts have welcomed the ban, urging the government to ensure effective enforcement.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), described it as a bold step that could positively impact the economy. He emphasized the need for strong political will to enforce the directive and prevent sabotage.

He also noted that sourcing crude oil domestically will:

Reduce forex pressure
Enhance energy security
Stabilize fuel prices

Similarly, Prof. Wumi Iledare, an expert in Petroleum Economics, and Dr. Bala Zakka, an energy analyst, praised the policy as long overdue. However, they urged the government to ensure that local refineries operate at full capacity and are not forced to purchase crude at fluctuating exchange rates.

Global Oil Market Update: Prices Surge to $76.45 Per Barrel

Meanwhile, oil prices surged on February 5, 2025, due to concerns over supply disruptions. Brent crude rose 1.03% to $76.45 per barrel, while WTI crude increased 1.88% to $73.89 per barrel.

Conclusion

The Federal Government’s ban on crude oil exports meant for domestic refineries is a decisive move aimed at improving Nigeria’s refining capacity, reducing fuel imports, and strengthening energy security. However, strict enforcement and increased crude production will be crucial to the policy’s success.