LAGOS — Nigeria must urgently increase crude oil production, strengthen evacuation infrastructure, and establish a transparent domestic crude market to reliably supply its rapidly expanding refining industry, the Independent Petroleum Producers Group (IPPG) said.
The group warned that Nigeria’s emerging refining capacity could require more than 1.5 million barrels of crude oil per day in the medium term, putting significant pressure on the country’s upstream sector unless production grows substantially.
The Chairman of the IPPG, Adegbite Falade, made the call while delivering the opening keynote address at the 2026 Nigeria Oil Refining Summit (NORS), organised by the Crude Oil Refinery-Owners Association of Nigeria (CORAN).
The summit, themed “Refining for Value: Linking Upstream Supply to Downstream Demand,” brought together regulators, producers, refiners, investors, marketers and other stakeholders to examine how Nigeria can build a more integrated petroleum value chain.
Refinery growth creates new crude supply challenge
According to the IPPG chairman, Nigeria has reached a critical stage in its petroleum-sector transition.
For more than six decades, the country exported crude oil while importing much of the refined products consumed domestically. The expansion of local refining capacity is now changing that structure, but it is simultaneously creating a new challenge: ensuring sufficient and reliable crude feedstock for domestic refineries.
The chairman said Nigeria could technically and geologically supply its refineries, but commercial and logistical constraints remained significant obstacles.
“Geologically, yes. Technically, yes. Commercially and logistically, not yet,” he said, arguing that reliable refinery feedstock would require higher oil production, protected evacuation infrastructure, appropriate crude-to-refinery matching and competitive commercial arrangements.
He said the issue could not be resolved through regulation alone.
Domestic refineries could require 1.5m bpd
The IPPG estimated that domestic refineries could require more than 1.5 million barrels per day of crude in the medium term, depending on refinery rehabilitation, expansion, operating rates and the commissioning of additional modular plants.
That potential requirement is significant when compared with Nigeria’s current liquids production.
The IPPG chairman cited the Nigerian Upstream Regulatory Commission’s August 2026 production report, which put Nigeria’s total liquids output at about 1.68 million barrels per day.
At such levels, he warned, a rapid increase in domestic refinery demand could leave the upstream sector with limited flexibility to meet other commitments.
These include crude export obligations, government revenue requirements, crude-backed financing arrangements, joint-venture partner entitlements, planned and unplanned production outages, OPEC-related commitments, crude-grade mismatches and disruptions affecting pipelines and terminals.
The implication, he said, is that Nigeria cannot simply redistribute an existing pool of crude among competing domestic and export markets.
Production itself must increase.
Nigeria has reserves, but investment is needed
The IPPG chairman said Nigeria’s challenge was not a lack of hydrocarbons in the ground.
He cited NUPRC’s reserves position as of January 1, 2026, which put the country’s crude oil and condensate reserves at approximately 37.01 billion barrels, while natural gas reserves stood at about 215.19 trillion cubic feet.
The central challenge, therefore, is converting reserves into commercially viable production and ensuring that the resulting crude can reach refineries efficiently.
That process, he said, would require sustained investment, fiscal stability, improved security, infrastructure development, regulatory certainty and bankable commercial terms.
He also stressed the need to view the upstream and downstream segments as parts of a single petroleum value chain rather than separate industries competing for policy attention.
DCSO compliance improves
The IPPG chairman welcomed progress in implementing the Domestic Crude Supply Obligation (DCSO) under Section 109 of the Petroleum Industry Act.
He cited NUPRC data showing that DCSO compliance rose to approximately 97.4% in the second quarter of 2026, from about 41% in the first quarter.
The improvement, he said, demonstrated that regulatory frameworks could produce results when supported by cooperation among regulators, producers and refiners.
However, he stressed that statutory compliance must ultimately translate into commercially workable crude-supply arrangements.
The IPPG, which represents 34 indigenous exploration and production companies, has an increasingly important role in that process, he said, noting that member companies account for more than half of Nigeria’s oil and gas production.
Four priorities for Nigeria’s refining ambitions
The IPPG chairman outlined four broad priorities for ensuring that Nigeria’s expanding refinery base has access to sufficient crude.
1. Increase crude production
The first priority is to expand Nigeria’s production base.
The group argued that increasing domestic refinery demand cannot be addressed simply by reallocating existing crude volumes.
Instead, Nigeria needs to attract more investment into exploration and field development, accelerate marginal-field production, improve access to capital and maintain an internationally competitive upstream investment environment.
“Nigeria cannot refine barrels that are not produced,” the IPPG chairman said.
This means policies designed to support refining must also create incentives for upstream companies to drill, develop and produce additional barrels.
2. Protect crude evacuation infrastructure
The second priority is to secure and modernise infrastructure used to move crude from producing fields to terminals and refineries.
The IPPG acknowledged progress in reducing crude theft and pipeline vandalism but said security measures must be complemented by infrastructure investment.
It called for dedicated crude evacuation corridors, secure pipelines, adequate terminal capacity, sufficient storage, functional jetties and efficient marine logistics.
The objective is to ensure that barrels produced in Nigeria are not stranded because of infrastructure bottlenecks between the oil field and the refinery.
3. Create a functioning domestic crude market
The third priority is the development of a genuine domestic crude market.
The IPPG proposed a system capable of aggregating volumes from different producers while facilitating grade blending, transparent swaps, substitutions among equivalent crude grades and efficient terminal delivery.
The chairman stressed that refineries cannot treat crude oil as a completely interchangeable commodity.
A refinery needs a specific crude grade, in the required volume and quality, delivered to the appropriate location and within the required timeframe.
The commercial terms must also be sufficiently transparent and competitive to make the transaction viable for both producers and refiners.
Nigeria can target regional refining hub status
The fourth priority is to position Nigeria as a major African refining and petrochemical centre.
The IPPG said changes in global refining capacity, energy-security concerns and shifting international trade flows could create an opportunity for Nigeria to develop a larger role in regional petroleum-product supply.
The country, according to the group, has several structural advantages, including substantial hydrocarbon reserves, a large domestic market, entrepreneurial capacity and a strategic geographical position.
But converting those advantages into a sustainable refining hub would require deliberate policy and investment rather than refinery capacity alone.
Policy reforms have changed the market
The IPPG chairman also credited recent petroleum-sector reforms with changing the economics of Nigeria’s downstream market.
He cited the removal of petrol subsidies, movement towards a market-based foreign-exchange regime, the naira-for-crude initiative and implementation of the Petroleum Industry Act as measures that have altered the operating environment.
According to him, these reforms are creating stronger market signals for investment and improving the prospects for a more commercially sustainable downstream industry.
He also commended the private sector for driving the expansion of domestic refining capacity, particularly the 650,000-barrel-per-day Dangote Refinery, while recognising other refiners investing in the sector.
The emergence of large-scale domestic refining capacity, he said, means Nigeria’s long-standing ambition of reducing dependence on imported refined products is moving from policy aspiration towards a more established market reality.
From crude allocation to bankable contracts
For the transition to succeed, however, the IPPG said Nigeria needs to change how crude supply is organised.
The group called for a shift from annual allocation exercises to rolling supply planning, from mandates to bankable contracts, and from refinery capacity announcements to verifiable throughput.
It also advocated a move away from opaque discounts towards transparent market pricing and from fragmented logistics towards greater aggregation and optimisation.
Most importantly, it argued that policymakers should focus increasingly on growing production rather than simply managing scarcity.
Upstream and downstream must move together
The IPPG said the expansion of Nigeria’s refining sector creates an opportunity to build a more integrated petroleum economy, but warned that the opportunity could be constrained if upstream production fails to keep pace.
The group’s position places crude supply at the centre of Nigeria’s refining ambitions: additional refining capacity creates additional demand for crude, while increasing domestic crude demand creates a stronger incentive to expand upstream production.
The IPPG therefore called on the government, regulators, refiners, financiers and infrastructure operators to work with producers to develop a domestic crude market that is secure, transparent, competitive and investable.
The chairman said the objective should ultimately go beyond simply feeding Nigerian refineries.
If the upstream and downstream sectors can be effectively connected, Nigeria could use its crude resources to support domestic refining, petrochemicals, manufacturing, employment and wider industrial development while strengthening its position in Africa’s energy market.
The central message from the IPPG at NORS 2026 was clear: Nigeria’s refinery expansion has created a new demand for crude, and meeting that demand will require the country to produce more, move crude more efficiently and build a domestic crude market based on transparent and commercially viable transactions.
