Federal Government to Cut Crude Oil Supply to Dangote Refinery Amid Boost in Local Refinery Operations

The Nigerian government is considering reducing its crude oil supply to the Dangote Petroleum Refinery, currently receiving 300,000 barrels per day, as part of an effort to accommodate the increasing output from the nation’s refineries, particularly the recently revived Warri and Port Harcourt facilities. This reduction will take effect unless there is a significant surge in the country’s crude oil production.

The adjustment is tied to the government’s naira-for-crude initiative, a policy designed to ensure that crude oil allocations to local refineries are paid for in Nigerian naira rather than in foreign currency. Under the scheme, refineries like Dangote’s receive crude oil at a subsidized rate to encourage local production and curb foreign exchange volatility.

With the recent revival of the Warri and Port Harcourt refineries, both operating at a combined capacity of 135,000 barrels per day, the government now faces the challenge of balancing crude supply across domestic refineries. The new allocation formula aims to increase competition within the downstream sector and stimulate domestic refining.

Sources familiar with the development told The PUNCH that the crude allocation to Dangote Refinery, which currently receives 300,000 barrels per day of the 450,000 barrels allocated for domestic refineries, is likely to decrease. As more refineries come online, crude supply will need to be divided among them to ensure sufficient fuel production.

The Warri Refinery, which resumed operations last week, and the new Port Harcourt refinery are expected to claim a portion of the crude allocation. Port Harcourt’s refinery is projected to receive up to 50,000 barrels per day, while the remaining 250,000 barrels will be shared between Dangote and other refineries.

One official emphasized that unless Nigeria’s oil production improves, the planned reduction in crude supply to Dangote Refinery could become a reality. Additionally, the government has stopped selling crude oil to refineries on credit, pushing for upfront payments to strengthen national revenue streams.

The Crude Oil Refinery Owners Association of Nigeria (CORAN) has weighed in on the situation, asserting that while the naira-for-crude initiative helped stabilize the foreign exchange market and supported local production, the government should not drastically reduce allocations to local refineries. CORAN’s Publicity Secretary, Eche Idoko, stressed that local production of petrol should remain a priority, especially with the price of petrol recently declining.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is working toward a more sustainable oil production model, with forecasts indicating an increase in output to meet local refining needs. The NUPRC aims for a target of over 2 million barrels per day, with the country’s refineries projected to require 770,500 barrels daily in the first half of 2025.

In the long term, Nigeria’s oil sector aims for greater self-reliance and resilience, with enhanced production, infrastructure investment, and strategic collaborations with local refineries, all designed to bolster the nation’s refining capacity and energy security.