• Nigeria’s upstream regulator urges private refiners to acquire oil blocks to secure crude supply.

• Authorities promote vertical integration to address structural bottlenecks in crude access and logistics.

• Dangote Group advances upstream production to feed its refinery, highlighting emerging integration trend.

The Nigerian Upstream Petroleum Regulatory Commission urged members of the refining sector to acquire oil blocks during upcoming licensing rounds. Oritsemeyiwa Eyesan, director general of the regulator, presented the strategy during a meeting in Abuja with the Association of Refining Enterprises of Nigeria on April 27.

The regulator said this approach would allow refiners to secure direct access to crude oil and reduce dependence on uncertain supply arrangements, despite Nigeria’s abundant reserves.

Moreover, the agency said vertical integration would strengthen commercial stability and improve participation across the oil value chain.

Structural bottlenecks limit refinery supply

Authorities identified a mismatch between Nigeria’s crude oil potential and the ability of domestic refineries to secure consistent feedstock. The regulator said crude availability was not the core issue. Instead, it highlighted inefficiencies in supply coordination, logistics and cost structures.

In addition, the regulator recommended long-term supply contracts between producers and refiners to improve predictability, stabilize pricing and support industrial planning. However, structural constraints persist. The regulator cited weak pipeline networks, evacuation bottlenecks, limited storage capacity and underdeveloped maritime logistics as key challenges affecting refinery operations.

As a result, upstream participation by refiners has emerged as a strategic option. This model allows operators to secure supply, increase value capture and strengthen operational control. However, this shift requires significant capital investment, technical expertise and exposure to exploration and production risks.

Dangote illustrates early integration model

Dangote Group already reflects this integration strategy. The group plans to begin crude production at its Kalaekule field on the OML 72 license, previously acquired from Shell. Initial output will reach 20,000 barrels per day and will later increase to 100,000 barrels per day across OML 72 and OML 71. The crude will supply directly its refining operations, demonstrating a full upstream-downstream integration model.

Authorities said improved crude access would reduce Nigeria’s reliance on imported refined products. In addition, the strategy aims to strengthen energy security, conserve foreign exchange reserves and create jobs through domestic refining expansion. The ongoing dialogue between regulators and industry players forms part of a broader reform agenda combining regulatory adjustments, industrial integration and infrastructure investment.

However, the success of this strategy will depend on the ability of stakeholders to mobilize financing, execute projects efficiently and establish sustainable supply mechanisms.

This article was initially published in French by Olivier de Souza

Adapted in English by Ange J.A de Berry Quenum