• NUPRC allocates55.08 Mbbls, industry responds with 69.34 Mbbls
• Hormuz impasse shifts shipping routes to Africa

Domestic refineries in Nigeria absorbed 53.7 million barrels of crude oil and condensate in the second quarter of 2026, as increased local production and stronger implementation of the Domestic Crude Supply Obligation (DCSO) provided refiners with substantial volumes of feedstock.

The development, according to the latest DCSO performance report of the Nigerian Upstream Regulatory Commission (NUPRC), indicates growing effectiveness of the government’s policy requiring oil producers to make crude available to licensed domestic refineries.

The Commission said producers offered 69.34 million barrels to domestic refiners during the quarter, significantly above the 55.08 million barrels allocated to them under the DCSO framework. Refiners, however, took 53.7 million barrels, leaving 15.64 million barrels of the volumes offered untaken.

The 53.7 million barrels lifted by local refineries represented an overall DCSO performance of 97.4 per cent for the quarter, according to the NUPRC.

The figures suggest that domestic refiners are increasingly gaining access to locally produced crude, potentially reducing their exposure to international crude procurement costs and strengthening the security of feedstock for Nigeria’s emerging refining industry.

The NUPRC said enforcement of the DCSO was being undertaken pursuant to Section 109 of the Petroleum Industry Act (PIA) 2021, with the Commission meeting monthly with crude oil producers and licensed domestic refineries to determine the volumes to be offered.

However, the framework operates on a “willing buyer, willing seller” basis, meaning that the volumes ultimately exchanged are determined by commercial agreements between producers and refiners.

The monthly figures showed substantial variations in the volume offered and ultimately taken by refiners.

In April, the NUPRC allocated 18.13 million barrels to producers, but the producers offered 19.31 million barrels to domestic refiners. The refiners eventually took 20.88 million barrels, representing 114.9 per cent performance against the allocated volume.

In May, producers were allocated 18.78 million barrels but offered 23.19 million barrels to local refiners. Actual deliveries, however, fell to 14.23 million barrels, representing 75.8 per cent compliance.

The situation improved again in June, when 18.17 million barrels were allocated to producers, who offered 26.84 million barrels to refiners. The refiners eventually took 18.61 million barrels, representing 102.4 per cent performance.

The NUPRC attributed the improvement in DCSO performance partly to increased domestic oil production and the execution of long-term crude supply agreements backed by bankable sales and purchase agreements between producers and domestic refiners.

The Dangote Refinery accounted for the overwhelming share of the crude offered to domestic refineries during the quarter. According to the NUPRC, the refinery required 63 million barrels in Q2, while producers offered 68.1 million barrels.

The 68.1 million barrels offered to Dangote represented about 98 per cent of all crude volumes offered to domestic refiners during the quarter. The refinery, however, accepted 52.6 million barrels, equivalent to about 78 per cent of the volume offered to it.

The figures indicate that the challenge confronting the domestic refining industry is no longer solely the availability of locally produced crude, with the volume offered by producers exceeding the quantities refiners ultimately took during the quarter.

The development is particularly significant as disruptions to international energy and shipping markets have increased the risks and costs associated with importing crude and petroleum products.

The closure of the Strait of Hormuz and continuing tensions around the Red Sea have disrupted established maritime trade routes, forcing international shipping companies to seek alternative routes around Africa and through ports outside the affected waterways.

Maritime and logistics sources said the disruption had increased traffic along Africa’s eastern coastline, with vessels travelling around the Cape of Good Hope in South Africa before proceeding north towards Europe and the Mediterranean.

The diversion has become increasingly systematic, according to Kpler container intelligence, as shipowners seek to avoid the Red Sea route between the Bab al-Mandeb Strait and the Suez Canal.

Data from the International Monetary Fund’s PortWatch platform, based on ships’ GPS signals, showed that commercial vessel traffic around the Cape of Good Hope has more than tripled in three years, while traffic through the Bab al-Mandeb Strait has fallen by more than half.

Between March 1 and April 24, an average of 20 commercial vessels travelled around the Cape of Good Hope each day, compared with six during the corresponding period in 2023. Over the same period, daily traffic through the Bab al-Mandeb fell from an average of 18 vessels in 2023 to five.

The rerouting has increased the duration and cost of international shipping. Transport times between Asia and Europe have reportedly increased by an average of two weeks, while fuel consumption has risen by between 30 and 50 per cent. Shipping companies have also had to deploy 10 to 20 per cent more vessels to maintain existing service frequencies.

The additional pressure on global shipping costs has also been reflected in container freight rates. According to supply chain expert Yves Guillo of Paris-based consultancy Efeso, the average cost of transporting a standard 40-foot container on major shipping routes rose by 14 per cent in April compared with the same period last year, based on the Drewry freight index.

The disruption has also shifted activity towards alternative ports. Jeddah on Saudi Arabia’s Red Sea coast has emerged as an important transit hub, with vessels operated by major shipping companies including MSC, CMA CGM, Maersk and Cosco arriving through the Suez Canal before cargoes are moved by road to countries such as the United Arab Emirates, Bahrain and Kuwait.

Shipping companies are also considering Oman’s Sohar port and the UAE ports of Khorfakkan and Fujairah as alternative gateways outside the Strait of Hormuz. Aqaba in Jordan is being used to move cargo into Iraq, while a Turkish corridor is facilitating supplies into northern Iraq.

The diversion of shipping away from the Red Sea predates the latest Middle East conflict. According to commodities publication CyclOpe, vessels began avoiding the route following the November 19, 2023 attack on a container ship by Iran-backed Houthi forces operating from Yemen.

The present crisis has nevertheless accelerated the trend. Chairman of French shipping company Louis Dreyfus Armateurs, Edouard Louis-Dreyfus, said the latest developments had added further pressure to an already disrupted shipping system.

Guillo estimated that about 70 per cent of freight traffic that passed through the Red Sea in 2023 was now being rerouted around the Cape of Good Hope.

The disruption has produced winners and losers along the alternative trade routes. Some African ports have recorded increased activity, with the Tanger Med Port Authority reporting that it handled 11 million standard containers in 2025, representing an 8.4 per cent increase.

Egypt, however, has suffered significant revenue losses from the reduction in Suez Canal traffic. CyclOpe estimated that the country lost about $7 billion in canal toll revenue in 2024, representing a decline of more than 60 per cent from 2023.

For Nigeria, the disruptions point to strategic importance of strengthening domestic crude supply chains and refining capacity. With international shipping routes becoming longer, more expensive and increasingly vulnerable to geopolitical disruptions, reliable access to locally produced crude could provide domestic refiners with an important buffer against external supply and price shocks.

The NUPRC said it remained committed to sustaining recent gains in crude oil production and continuously enforcing the DCSO under the Petroleum Industry Act, with the broader objective of supporting Nigeria’s drive towards energy sufficiency.