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Reasons Oil Producers Urge Tinubu to Declare Crude Supply Emergency for Dangote Refinery

Published by admin on July 3rd, 2024.

Reasons Oil Producers Urge Tinubu to Declare Crude Supply Emergency for Dangote Refinery

By Okechukwu Nnodim

Amidst growing concerns over the insufficient domestic crude oil supply to the Dangote Petroleum Refinery and other local refiners, the Independent Petroleum Producers Group (IPPG) has called on President Bola Tinubu to declare a state of emergency on crude oil production in Nigeria.

IPPG, a coalition of Nigerian indigenous upstream exploration and production companies, interacts with the government and industry stakeholders on sector-related issues. The group includes 28 members such as Oando Plc, Aiteo, Seplat, Energia, Eroton, First E&P, and Frontier Oil.

Oil producers have voiced fears that the 2024 budget might only be partially implemented due to recent low crude production levels in Nigeria. The Nigerian National Petroleum Company Limited (NNPC) has already declared a war on the challenges hampering oil production and is currently working with its partners, including International Oil Companies (IOCs).

Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has urged oil producers to increase their investments in the upstream sector to boost oil output. These statements were made during the Nigeria Oil and Gas conference in Abuja.

Nigeria’s oil production has declined this year, dropping from over 1.4 million barrels per day in January to about 1.2 million barrels per day in April. Oil producers believe Nigeria should aim for a production level of about 2 million barrels per day to meet the demands of local refineries and for export.

The Dangote refinery and operators of modular refineries have raised concerns about the inadequate crude oil supply from IOCs and NNPC. Industry experts indicate that most crude volumes from IOCs and NNPC are pre-contracted to dealers amidst the country’s low production levels.

During his keynote address at the conference, IPPG Chairman Abdulrazaq Isa emphasized the need for extraordinary focus to address the industry’s long-term sustainability concerns. He suggested that President Tinubu might need to declare a state of emergency in the oil and gas sector to catalyze recovery.

Isa stressed the importance of collaboration and commitment between industry regulators (NUPRC and NMDPRA) and operators (NNPC, OPTS, and IPPG) to unlock incremental production. Despite Nigeria’s substantial hydrocarbon resources, the country’s production has dropped significantly, which is alarming given the nation’s potential.

Isa highlighted the need to conclude pending IOC divestment transactions and address deepwater development issues to unlock further production. He also stressed the importance of a national strategy to sustain domestic crude oil refining and petrochemical capacity and the urgent need to develop Nigeria’s gas resources.

Responding at the conference, NNPC’s Group Chief Executive Officer Mele Kyari announced a state of emergency in the oil and gas sector to boost crude oil production and grow reserves. Kyari indicated that a detailed analysis revealed Nigeria could produce two million barrels of crude oil per day without new rigs, but timely action by industry players is essential.

Kyari also mentioned plans to replace old crude oil pipelines and introduce a rig-sharing program with partners to ensure continuous production. He urged industry players to collaborate in reducing production costs and achieving target production levels. NNPC is also investing in critical midstream gas infrastructure to enhance domestic gas production and supply.

Minister Lokpobiri called on IPPG members to ramp up crude production, noting that if each of the 28 members produced at least 5,000 barrels daily, it would significantly boost Nigeria’s oil output.