Nigeria’s Crude Oil Supply Inadequate To Meet Daily Demand – FG

Lucky Obukohwo, Reporting

The Federal Government has acknowledged that Nigeria still lacks sufficient freely available crude oil to meet the Dangote Petroleum Refinery’s daily demand of 700,000 barrels, despite rising production levels and ongoing efforts to tackle oil theft.

Truth Live News Media reports that the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, revealed this during an interview on Channels Television’s Politics Today at the weekend, explaining that the country’s total crude oil output does not translate into an equivalent volume available to the government.

His remarks come amid renewed calls for government intervention in the petroleum sector, including proposals for discounted crude, production subsidies and other measures aimed at supporting domestic refining and reducing fuel costs.

Oyedele explained that although Nigeria produces approximately 1.8 million barrels of crude oil daily, a substantial portion goes to oil companies operating under production-sharing contracts and joint ventures.

“Production costs, royalties and other contractual obligations further reduce the volume accruing to the government.

“Under the production-sharing contract and joint venture, they share these things, and the ratios vary. Let’s say roughly 45:55,” he said.

According to the minister, oil companies recover eligible production expenses through cost oil, while royalties and contractual arrangements determine the quantity ultimately available to the government.

He said the country’s remaining crude oil revenue and resources had previously been largely consumed by the cost of maintaining fuel subsidies.

“The long and short of what I’m telling you is whatever is left for Nigeria, we exhaust it almost entirely because of fuel subsidy,” Oyedele stated.

He recalled that the situation was particularly severe before President Bola Tinubu introduced economic reforms in May 2023, when the Nigerian National Petroleum Company Limited (NNPC), which manages the country’s crude oil on its behalf, reportedly had less than 100,000 barrels of freely available crude remaining.

Oyedele said the government had depleted much of its revenue and resorted to printing money before committing future crude oil production to finance present fuel consumption.

“That was a ticking time bomb,” he said, describing the arrangement as unsustainable.

The minister acknowledged that the situation had improved following increased production, efforts to combat oil theft and the renegotiation of existing commitments that had tied down some of the country’s crude.

He also referenced concerns previously raised by businessman Tony Elumelu over the scale of crude oil theft in Nigeria, noting that subsequent reports had indicated improvements.

Despite these gains, Oyedele maintained that Nigeria had yet to reach the level required to meet the Dangote refinery’s full daily crude requirement.

“But we are still not at the point where we can give Dangote 700,000 barrels,” he said.

The minister rejected suggestions that the government should provide the refinery with discounted crude or sell it at production cost, arguing that such proposals failed to account for the country’s limited available volumes.

“We don’t have enough to service Dangote. Dangote imports crude,” he added.

Oyedele said the Federal Government’s naira-for-crude arrangement had helped stabilise aspects of the domestic petroleum market but had not completely resolved the challenges facing local refiners.

He expressed optimism that sustained growth in production and the release of additional barrels from existing commitments would eventually enable Nigeria to meet the needs of the Dangote refinery and other domestic operators.

“As we ramp up production and we free up some barrels, we’ll get to a point where we’ll be able to give Dangote everything he wants and other refiners will be able to get enough,” he said.

Oyedele also expressed hope that Nigeria would eventually refine all the crude oil it produces domestically and export refined petroleum products instead of crude.

He stressed that achieving this ambition would require sustained growth in production and further expansion of the country’s refining capacity.

The disclosure highlights the challenges facing Nigeria’s efforts to strengthen domestic refining, reduce dependence on imported petroleum products and ensure the long-term viability of its petroleum industry.