NUPRC plans crude, gas swaps to cut domestic supply costs

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is developing a domestic crude oil and gas swap system aimed at cutting transportation costs, improving feedstock supply to local refineries and strengthening Nigeria’s energy security as the regulator seeks to make domestic supply obligations more efficient.

Chief Executive of NUPRC, Oritsemeyiwa Eyesan, disclosed this during a courtesy visit to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in Abuja, saying consultations with industry stakeholders had begun to develop the framework for the proposed arrangement.

The initiative could reduce unnecessary logistics costs in the domestic petroleum supply chain by allowing producers and operators to exchange delivery obligations based on their proximity to export terminals or domestic buyers.

Under the proposed model, a producer with a domestic supply obligation near an export terminal could swap that obligation with another producer located closer to a refinery or other domestic offtaker, with the obligations subsequently netted off.

“How the swap works is that I have an obligation somewhere and I am close to an export facility. Somebody else has an obligation inland, and his own facility is close to a domestic offtaker. So, instead of trying to move from one end to the other, we just agree on a swap arrangement, and there is a mechanism for them to net off,” Eyesan said.

The arrangement, which is being developed with the Gas Aggregation Company of Nigeria Limited (GACN), is expected to improve crude and gas delivery logistics, reduce avoidable transportation costs and make locally produced petroleum products more competitive.

NUPRC said the mechanism would also strengthen compliance with the Domestic Crude Supply Obligation (DCSO) and Domestic Gas Supply Obligation (DGSO), while supporting the Federal Government’s drive for greater domestic energy security.

The proposal comes as compliance with the domestic crude supply framework improves. NUPRC data showed that local refineries received 53.7 million barrels of crude between April and June 2026, representing 97.4 per cent compliance with allocated domestic supply volumes.

Despite the improved compliance, the continued need for crude imports by some refineries highlights the gap between crude availability, commercial terms and efficient delivery to domestic plants.

That challenge also featured in the comments of NMDPRA Chief Executive, Rabiu Abdullahi Umar, who acknowledged that the Petroleum Industry Act provides for crude transactions on a willing-buyer, willing-seller basis but identified pricing as a major obstacle to domestic crude supply.

The pricing issue is particularly important for the economics of local refining because high feedstock and transportation costs can reduce the competitiveness of domestically refined petroleum products.

The proposed swap mechanism therefore seeks to address not only physical crude availability but also the efficiency of moving available feedstock from producers to refiners and other domestic users.

Eyesan said the framework remained at an early stage, with consultations still underway to determine the modalities for implementation.

She also pledged deeper collaboration between NUPRC and NMDPRA to tackle industry challenges and advance the objectives of the Petroleum Industry Act.

Umar commended NUPRC for improvements in domestic crude-supply enforcement and the successful 2025 licensing round, while also supporting the establishment of strategic petroleum reserves.

He said strategic reserves could strengthen Nigeria’s energy security, improve supply resilience and contribute to greater stability in domestic petroleum prices.

For Nigeria’s refining ambitions, the proposed swap system could become an important supply-chain reform if it successfully lowers logistics costs and improves the reliability of crude and gas deliveries. Its wider economic impact would depend on whether the savings are ultimately reflected in lower refining costs, stronger refinery utilisation and more competitive petroleum products.