Nginx Auth Request By Source IP

[John Baird]

I have been doing some reading an googling, and I am wondering if someone
can help.

I have an oauth2 service successfully authenticating nginx visitors.
Because Nginx is fronting a web application on the backend, the web
application does NOT have valid domain credentials to interact with the
nginx layer.

Goal:
I would like to be able to do something like the following:

geo $localhost {
  default 0;
  127.0.0.1/32 1;
}

server {
  location / {
    if ($localhost = 0) {
      auth_request = /oauth2/callback
      ....
    }
  }
}

Is this possible?
TL;DR -> bypass nginx oauth2 auth_request module when source ip is localhost
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