The proposed arrangement could allow producers to meet domestic supply obligations through nearby crude sources, reducing unnecessary transportation and easing pressure on local refiners….
The Nigerian Upstream Petroleum Regulatory Commission is exploring a new crude oil and gas swap framework that could change how domestic supply obligations are fulfilled and reduce the cost of delivering crude to Nigerian refineries.
The commission said it has begun consultations with key players across the petroleum industry as it works out the structure of the proposed arrangement.
Under the plan, producers would be able to meet their domestic supply obligations through a coordinated swap with other producers whose crude is better positioned geographically to supply a local refinery.
NUPRC Chief Executive, Oritsemeyiwa Eyesan, disclosed the development during a visit to the Nigerian Midstream and Downstream Petroleum Regulatory Authority in Abuja.
According to a statement by the commission’s Head of Media and Corporate Communications, Eniola Akinkuotu, the proposed system is designed to make domestic crude deliveries more efficient while lowering the logistical costs associated with moving crude across the country.
Eyesan explained that the arrangement would be particularly useful where one producer is located close to an export terminal while another producer is positioned closer to a domestic refinery.
Rather than transporting crude unnecessarily over long distances, the producers could use their respective locations to satisfy domestic supply requirements and subsequently reconcile the volumes through a formal netting mechanism.
The NUPRC boss said the commission was still consulting stakeholders and that the operational details of the scheme had yet to be finalised.
She added that the proposed framework would cover both crude oil and gas, with the Gas Aggregation Company Nigeria Limited expected to be involved in developing the gas component.
The initiative comes as Nigeria’s domestic refining sector continues to expand, increasing the need for a dependable supply of locally produced crude.
The proposed swap mechanism comes against the backdrop of a sharp improvement in compliance with Nigeria’s Domestic Crude Supply Obligation.
NUPRC data showed that domestic refineries received 53.7 million barrels of crude between April and June 2026.
That represented 97.4 per cent performance against the country’s domestic crude supply requirement for the second quarter.
Despite the improvement, however, some Nigerian refineries continue to import crude to maintain operations.
For regulators, the continued reliance on imported feedstock highlights a problem that goes beyond the volume of crude being supplied.
Refiners have complained that locally produced crude can sometimes be offered at prices that make it more expensive than imported alternatives. The situation can undermine the competitiveness of domestic refineries even when Nigerian crude is technically available.
Eyesan said the continued importation of crude was one of the reasons the commission was considering more efficient ways of matching domestic crude supplies with refinery demand.
While the proposed swap could help address the logistics side of the problem, crude pricing remains a major issue for refiners.
NMDPRA Chief Executive, Rabiu Abdullahi Umar, said the Petroleum Industry Act provides for petroleum transactions to take place on a willing-buyer, willing-seller basis.
However, he stressed that the price at which crude is made available to domestic refiners remains crucial to the viability of the refining business.
His comments underline a central challenge facing Nigeria’s refining ambitions: increasing crude availability alone may not be enough if domestic refiners cannot obtain the feedstock at commercially sustainable prices.
The NMDPRA therefore welcomed efforts to improve domestic crude supply while also expressing support for the development of strategic petroleum reserves.
According to the authority, strategic reserves could strengthen the country’s energy security and help improve price stability.
What the proposed swap could change
If eventually approved and implemented, the crude swap system could give producers and refiners greater flexibility in meeting domestic supply requirements.
A producer with an obligation and access to an export facility, for example, could potentially have its obligation matched against crude supplied by another producer located closer to a domestic refinery.
Such an arrangement could eliminate unnecessary transportation, reduce logistics costs and allow existing supply networks to be used more efficiently.
It could also make compliance with the Domestic Crude Supply Obligation and Domestic Gas Supply Obligation more practical without requiring every producer to physically deliver crude or gas to a specific location.
However, the commission has made it clear that the proposal remains at the consultation stage.
The precise rules governing eligibility, volumes, pricing, verification, settlement and enforcement will have to be agreed with industry stakeholders before the system can become operational.
The timing of the proposal is significant as Nigeria’s refining landscape undergoes a major transformation.
With the Dangote refinery and a growing number of private and modular refineries increasing their activities, demand for reliable domestic crude supplies is expected to remain high.
The regulators are therefore facing a dual challenge: ensuring that producers meet their domestic supply obligations while making sure the crude actually reaches refineries at prices that allow them to operate competitively.
The proposed swap arrangement could provide part of the answer by tackling the logistical inefficiencies surrounding domestic crude deliveries.
But its ultimate impact will depend on how the framework addresses the equally important question of pricing.
For now, NUPRC’s consultations signal that regulators are looking beyond simply enforcing supply quotas and are considering a more flexible system designed to ensure that Nigeria’s growing refining capacity has access to the crude it needs.
