Nigerian Refineries Could Save Billions with Proposed Crude Swap Arrangement

Nigeria's Upstream Petroleum Regulatory Commission is working on a domestic crude oil and gas swap arrangement aimed at cutting supply costs and ensuring more crude is available to local refineries. The proposed swap framework, expected to strengthen compliance with the Domestic Crude Supply Obligation and Domestic Gas Supply Obligation, could save between $246.6m and $328.8m in logistics and associated acquisition costs for domestic refineries.

According to National Publicity Secretary of the Crude Oil Refiners Association of Nigeria, Eche Idoko, the swap would eliminate costly transportation of crude from distant locations to refineries by allowing refiners to take delivery from the nearest available crude terminal. Logistics costs could sometimes exceed $4 per barrel, particularly where barging was involved.

The arrangement is expected to work as follows: a refinery would be allowed to take crude from a producer or export terminal closer to it, while the parties would subsequently reconcile the volumes at the original export terminal. This would allow refiners to pick product from the closest crude export terminal, reducing logistics costs and making locally sourced crude more competitive in the market.