Nigerian oil refiners, including the Dangote Petroleum Refinery, could shave between $246.6 million and $328.8 million off operational costs under a proposed domestic crude swap plan designed to slash expensive logistics charges.

The initiative, currently under review by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) alongside upstream producers and refiners, seeks to eliminate long-haul freight and coastal barging fees by allowing refiners to draw crude from the nearest available export terminals or wellheads.

Data from the upstream regulator shows that domestic plants received 82.2 million barrels of crude under the Domestic Crude Supply Obligation during the first half of 2026. Deliveries began at 28.5 million barrels in the first quarter—an average of 316,667 barrels per day—before jumping to 53.7 million barrels, or roughly 590,110 bpd, in the second quarter.

Crude swaps unlock crucial refining margins

If the swap mechanism had been in place from January through June, an estimated savings of $3 to $4 per barrel would have yielded $246.6 million at the conservative mark and $328.8 million at the upper limit. A similar delivery volume over the second half of the year would unlock matching savings.

Eche Idoko, spokesperson for the Crude Oil Refinery-owners Association of Nigeria (CORAN), said shipping expenses routinely erode thin refining margins, especially when operators rely on coastal barging or road transport.

“The logistics costs of taking crude from afar are hovering between $3 and $4. If they are trucking it, it is between $3 to $4 extra. So, the swap eliminates this,” Idoko said. “Sometimes it is more, like $5. If you are doing barging like Dangote, it is as high as $12. A swap saves this amount in logistics.”

Logistics overhaul solves domestic refinery bottlenecks

Under the proposed model, the international baseline price of crude remains untouched, but refiners swap delivery obligations. If a refinery holds an allocation from a distant terminal, a nearby producer can supply the required barrels locally. The two producers then settle the volume difference at the original offshore export terminal.

Key producer and refiner groups—including the Oil Producers Trade Section (OPTS), CORAN, and the Independent Petroleum Producers Group (IPPG)—have agreed to back the rollout, alongside a centralized domestic crude trading platform.

The reform also aims to fix chronic supply shortfalls. In the first quarter of 2026, the NUPRC allocated 61.9 million barrels to local plants, and producers offered 68.7 million barrels, yet only 28.5 million barrels were physically delivered. Regulators and refiners believe clearing the logistics hurdle will finally bridge that gap.