Nigerian Modular Refineries Reject Crude Oil Over High Costs, Unrealistic Terms

Modular refineries in Nigeria have opted out of lifting crude oil allocated under the Domestic Crude Supply Obligation (DCSO) for the second quarter of 2026, citing prohibitive costs and unrealistic commercial terms.

The Crude Oil Refinery Owners Association of Nigeria (CORAN) confirmed that its members did not accept the crude oil offered. CORAN spokesman Eche Idoko explained that the use of international pricing benchmarks such as Platts, Brent, and West Texas Intermediate makes crude oil prohibitively expensive for modular refineries. This pricing structure also results in what Idoko described as double charges on logistics.

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The smaller refineries couldn’t take crude because of the issues we have outlined. The commercial terms were not realistic. And though receiving attention, these issues have not been resolved.

Idoko elaborated that modular refineries usually purchase crude directly from producing assets and bear the evacuation costs to their facilities. However, international pricing indices like Brent and WTI already incorporate these costs. When refiners are quoted prices based on these indices, they end up paying for freight and insurance while still incurring the cost of picking up the product at the wellhead.

According to Nigerian Upstream Petroleum Regulatory Commission (NUPRC) data, 68.1 million barrels were offered to the Dangote Petroleum Refinery, which accepted 52.6 million barrels. The NUPRC report did not indicate any other refinery receiving crude during the period. CORAN insists that the commercial terms offered under the DCSO framework, established by the Petroleum Industry Act, remain unresolved and unrealistic for smaller refineries.

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Quoting prices using a pricing index like Platt makes crude costs very high, especially for modular refineries, and amounts to double charges. For example, typical crude purchases for these refineries entail us going to the producing assets to pick the oil. Now, Brent and WTI pricing indices encapsulate all the costs. So when the producers give modular refineries prices at Brent or WTI rates, they (refiners) pay for freight and insurance while still bearing the cost of picking the product at the wellhead.