Nigeria Must Grow Crude Supply as Refinery Demand Rises, FG Says

• The Federal Government says Nigeria must shift from crude exports towards domestic refining, petrochemicals and higher-value industrial activities.

• CORAN says some local refineries still struggle to secure crude on commercially viable terms despite continued fuel imports and available refining capacity.

• IPPG warns that domestic refineries could require more than 1.5 million barrels per day of crude, putting pressure on Nigeria’s current production base.

September 29, () – The Federal Government has said Nigeria must progressively move away from an economy centred on crude oil exports and capture more value through domestic refining, petrochemicals and related industrial activities.

The Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, stated this on Monday through his Technical Adviser on Regulation, Umar Gwandu, who represented him at the third Nigeria Oil Refining Summit organised by the Crude Oil Refiners Association of Nigeria (CORAN) in Lagos.

Lokpobiri said Nigeria had for decades produced crude oil on a significant scale while remaining heavily dependent on imported petroleum products, making the expansion of domestic refining a strategic priority.

He said the Federal Government was strengthening the Domestic Supply Obligation (DSO) to ensure local refineries have reliable access to crude, describing the policy as critical to national energy security.

“The Domestic Supply Obligation should therefore not be viewed merely as an administrative allocation mechanism. It is an important instrument for advancing national energy security and strengthening the linkage between our upstream and downstream sectors,” he said.

Crude supply emerges as refining bottleneck

The government’s position comes as refiners and upstream producers raise concerns over whether Nigeria can provide sufficient crude to meet rapidly increasing domestic refining demand.

Lokpobiri said the Nigerian Upstream Petroleum Regulatory Commission had developed a DSO framework in consultation with the Nigerian National Petroleum Company Limited, the Oil Producers Trade Section, the Independent Petroleum Producers Group, CORAN and other domestic refining interests.

He said the framework must evolve into a “reliable, transparent, and commercially bankable” crude supply system capable of supporting domestic refineries.

“The policy challenge is therefore one of alignment, not confrontation. We must eliminate situations in which crude is theoretically available but cannot be commercially delivered to a refiner,” he said.

CORAN Chairman, Momoh Oyarekhua, said some domestic refineries continued to face difficulties accessing crude on commercially viable terms despite Nigeria’s abundant resources.

He called for full institutionalisation of the naira-for-crude arrangement, stronger enforcement of the DSO under Section 109 of the Petroleum Industry Act and crude swap arrangements that would allow refineries located close to producing assets to access nearby crude.

Oyarekhua also urged the government to develop a domestic crude pricing template that reflects crude quality and delivery points without automatically imposing international logistics costs where domestic evacuation costs are lower.

He said Nigeria should progressively reduce petroleum-product imports and restrict them to objectively determined domestic supply shortfalls and strategic-stock requirements.

Refinery demand could exceed 1.5 million bpd

The scale of the emerging supply challenge was highlighted by Adegbite Falade, chairman of the Independent Petroleum Producers Group, who said domestic refineries could require more than 1.5 million barrels per day of crude in the medium term as existing facilities are rehabilitated, expanded and new modular refineries come on stream.

Falade, who is also an executive at Aradel, said Nigeria’s liquid production stood at 1.68 million barrels per day in August 2026, based on NUPRC’s August production report.

He warned that if refinery demand approaches 1.5 million bpd while production remains around 1.6 million bpd, there would be limited room for exports, government revenue requirements, crude-backed financing, joint-venture offtake, production disruptions, OPEC commitments and infrastructure constraints.

“Geologically, yes; technically, yes; commercially and logistically, not yet there; and certainly, not by regulation alone,” Falade said when asked whether Nigeria could reliably feed its refineries.

He argued that the solution could not simply be to redistribute existing crude volumes among domestic refineries.

“First, we must grow the production base. Nigeria cannot refine barrels that are not produced,” he said, calling for increased exploration, faster field development, marginal-field growth and improved access to capital.

Falade also called for modernisation of pipelines, terminals, storage facilities, jetties and marine logistics, alongside the creation of a domestic crude market capable of aggregating volumes, blending grades and facilitating transparent swaps and substitutions.

“A barrel is not simply a barrel. A refinery requires the right crude grade, in the right volume, of the right quality, delivered to the right location, at the right time and under the right commercial terms,” he said.

Falade added that DSO compliance had improved to approximately 97.4 percent in the second quarter of 2026 from about 41 percent in the first quarter, citing NUPRC data.

He said the 34-member IPPG now accounted for more than half of Nigeria’s total oil and gas production, underscoring the importance of upstream producers in determining whether the country’s refining ambitions can be sustained.