Nigeria's Refining Boom Hits Snag as Crude Shortage Bites

Nigeria's oil refining boom is facing a major hurdle: securing enough crude to feed its growing refineries. The country has spent decades exporting raw crude and importing refined products, but with the start-up of the Dangote refinery in Lagos and revival efforts at state-owned plants, that story is changing.

However, operators say the industry's success is threatened by a supply problem. Crude output has hovered below Nigeria's OPEC quota for years due to theft, pipeline vandalism, underinvestment, and ageing fields. Much of what is produced is committed to long-term export contracts, leaving local buyers with contested volumes.

Adegbite Falade, chairman of the Independent Petroleum Producers Group (IPPG), warned that domestic refineries could require 1.5 million barrels of crude a day in the medium term, close to all of Nigeria's liquids output of 1.68 million barrels a day in August. Falade said this would leave the system with a 'very narrow margin' for export commitments, government revenue requirements, and other obligations.

IPPG members account for more than half of Nigeria's oil and gas output, and Falade emphasized that simply redistributing existing barrels won't be enough to meet demand. He called for growth in production and a shift from mandates to bankable contracts, as well as transparent market pricing.