Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, has attributed the inability of International Oil Companies (IOC) to allocate crude to domestic refiners under the Domestic Crude Oil Supply Obligation framework, to a pre-production agreement signed by most IOCs to secure offtake of crude products with long-term customers.
He provided the insight in his address to the Nigeria Energy International Summit holding in Abuja.
Local refiners recently accused the regulator of failure to allocate sufficient crude oil to them, thereby preventing domestic refiners from reaching their full production potential and also preferring to issue petrol import licences.
Lokpobiri, however, said the only solution was to increase crude production.
The minister emphasised the need for more investments to boost crude oil production, ensuring that both domestic and external obligations are met.
“Today, we have a challenge with domestic crude oil supply obligation, which is provided for in the Petroleum Industry Act, but we cannot keep what we do not produce. But you can’t keep what you don’t produce. You can’t keep what you have already committed.
“I do know that most of you know the companies operating in Nigeria had commitments when they were raising funds for investment. But if we increase our production, we’ll be able to get more volumes, satisfy both our domestic obligation and also satisfy our external obligations,” he said.
Continuing, the minister said this challenge faced by companies operating in Nigeria’s upstream sector is responsible for the underperformance of the country’s oil and gas industry.
He pointed out that poor performance in the upstream sector has negatively impacted local refineries, making it difficult for them to access crude oil feedstock for operations.
“…once the upstream succeeds, the midstream will succeed, and the downstream will succeed. I believe the only way we can increase our upstream development is by investments. And these investments will not come for less,” he added.
Lokpobiri further noted that Nigeria has the potential to become a major player in the global oil and gas market, but this requires a stable and predictable regulatory and legal framework.
“That is why, within the short period we’ve been in office, less than one and a half years, you can agree with me that we are making steady progress. We are guaranteeing a stable, predictable regulatory and legal framework. We are making policies that will make our fiscals globally competitive,” he added.
