With the passage of the much-awaited Petroleum Industry Bill (PIB) by both chambers of the National Assembly last week, local refineries would be able to purchase Nigerian crude in Naira.
All private refining plants will have access to local crude oil by paying naira instead of foreign exchange as before.
Dangote refinery is nearing completion and could be ready by first quarter of next year while other refineries such as Waltersmith Refining & Petrochemical Company Limited, OPAC Refineries, Niger Delta Petroleum Resources, BUA Refinery & Petrochemicals and Edo Refinery and Petrochemical Company Limited are at various stages of construction.
The parliament, in the Bill, recommended that payment guarantees is to be provided by refinery license holders either in dollars or naira.
“Since refiners themselves may only be paid in naira for deliveries to the domestic market, it may be onerous to require US dollar payments,” the Senate Joint Committee on Downstream Petroleum Sector; Petroleum Resources (Upstream); and Gas said in its report.
The bill provides that two regulators be established, namely the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
In Section 109 subsections 2 and 3 of the Bill, which is expected to be transmitted to the President for his ascent before it can become law, it was stated that, “The commission may issue regulations or guidelines on the mechanism for the imposition of a domestic crude oil supply obligation on lessees of upstream petroleum operations, including applicable penalties.
“The authority shall supply the commission on a regular basis, the crude oil requirements of refineries in operation and where shortages or inadequate supply conditions occur, report such conditions to the commission.”
The bill sent to the National Assembly provides that “the commission shall ensure that the domestic crude oil supply obligation contains the following: (a) crude oil may only be sold to holders of crude oil refining licenses, whose refineries are in operation.
“(b) the supply of crude oil shall be commercially negotiated between the lessee and the crude oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil; and (c) holders of crude oil refining licenses shall provide payment guarantees as required by the applicable lessee and payment for crude oil purchased pursuant to obligations shall be in US dollars.”
The lawmakers, however, recommended that “holders of crude oil refining licenses shall provide payment guarantees as required by the applicable lessee and payment for crude oil purchased pursuant to obligations shall be in US dollars or naira, as may be agreed between the lessees or suppliers and the licensee of the refining license.”
The Senate said possible penalties should apply to the crude oil supply obligations in order to strengthen possible enforcement.