NUPRC ANNOUNCES ADDITION OF 1.087BN BARRELS TO NIGERIA’S CRUDE OIL RESERVES, 2.573 TCF TO GAS STOCK
the new template has the buy-in of all, in a bid to foster a seamless implementation of the domestic crude obligation and ensure consistent supply of crude oil to domestic refineries.
With the development, the NUPRC chief executive assured that the second half of 2024, was poised to witness increased synergy between local refineries and producing companies, setting the stage for a more robust and self-reliant petroleum landscape in Nigeria.
Under the procedure for domestic crude oil requirement allocation, the NUPRC stated that all allocated DCSO volumes shall be fully discharged into the refinery it is meant for and fully utilised for domestic refining.
On the currency of payment for DCSO transactions, it said: “The payment shall be in either United States Dollar or Naira or both. Where the payment is in both currencies, the payment split shall be as agreed in the Sales and Purchase Agreement (SPA) between the producer and the refiner.”
It added: “Where a lessee enters a long-term supply contract with the refiner in fulfilment of his domestic crude oil supply obligation, the obligation to sell crude to the refiner by the lessee is reliant upon the refinery being in operation.
“All DCSO allocated cargoes must be discharged into the refinery facility they are programmed for and shall not be diverted or swapped.
“Utilisation of any DCSO allocation by any refiner for any purpose other than domestic processing, without a written approval by the commission shall attract suspension from DCSO allocation for a period determined by the commission in addition to any other administrative penalty that may be imposed by the commission”
By the new rules, in the occurrence of a default in payment by the refiner, the commission said it shall not allocate DCSO to the defaulter for a period to be determined by it, in addition to the penalty contained in the sales agreement between the refiner and the lessee.
“The following penalties shall apply to any refiner that fail to offtake the allocated DCSO (except in the event of force majeure as defined in the SPA), in addition to any other agreed penalty in the SPA between the Lessee and the refiner:
“For pipeline, barging or trucking deliveries, take or pay conditions shall apply. For marine deliveries, the lessee shall sell the parcel of the crude oil as a distressed cargo and the defaulting refiner shall be liable for liquidated damages as provided in the SPA
“Where the lessee fails to supply the allocated DCSO resulting in shortages for the refinery (except in the event of force majeure as defined in the SPA), the defaulting lessee will be liable to administrative penalty to be determined and imposed by the commission,” the NUPRC stated.
The commission had a few weeks ago conveyed a meeting of stakeholders, following complaints by local refineries owners, after it said it noticed some challenges hindering the seamless implementation of the DCSO provision.
According to Komolafe, the commission needed to step in to resolve the challenge and later set up a committee to look at the issues, noting that it was mainly caused by the absence of a clear rule of engagement.