Securing a reliable crude oil supply deal and determining the appropriate selling price are two major hurdles facing the Nigerian National Petroleum Company (NNPC) Limited as the state oil company assumes its role as the sole off-taker of petrol from Dangote Petroleum Refinery.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), on Tuesday, said the $20 billion Dangote refinery in Lagos will supply the Nigerian market with 25 million litres of daily petrol this September and 30 million litres in October.
BusinessDay gathered that the NNPC is yet to come up with an iron-clad arrangement to secure adequate supplies of crude feedstock that will guarantee the immediate refining of 25-30 million litres of daily petrol this September.
“For NNPC, the issue of crude supply is still a major concern, and postulations on how much NNPC will sell the crude to Dangote in naira is still a major hurdle,” a senior executive in the downstream business told BusinessDay.
Sources said petrol from Dangote refinery is ready to hit filling stations within 48 hours upon NNPC formalisation of modalities around crude feedstock and price to sell crude in naira.
“Our PMS (Premium Motor Spirit) can be in filling stations within the next 48 hours depending on NNPC,” Aliko Dangote, president of Dangote Group, said on Tuesday.
BusinessDay recalls that Dangote and other local modular refineries have repeatedly accused the NNPC of not selling crude to them.
Anthony Chiejina, a spokesperson for the Dangote Group, said in August that the refinery required 15 cargoes of crude oil to operate in September but had failed to source the necessary volume from either the NNPC or international oil companies (IOCs) active in Nigeria.
“For September, our requirement is 15 cargoes, of which NNPC allocated six. Despite appealing to Nigerian Upstream Petroleum Regulatory Commission (NUPRC), we’ve been unable to secure the remaining cargoes,” Chiejina said in a statement.
The NUPRC appeared to signal a detente in relations between Dangote and IOCs active in Nigeria on July 11 when it announced that major oil producers had agreed to develop a framework to ensure sustainable supply of crude oil to local refineries, stressing that the product would be supplied at the market price.
Tensions had previously come to a head in June when representatives of Dangote alleged that the refinery was being charged a premium of over $6 per barrel by IOCs for crude oil, noting that reluctance from suppliers had harmed the refinery’s ability to source feedstock.
Additionally, the NNPC, once expected to be one of the plant’s largest suppliers, has underperformed in relation to its expected crude deliveries, leaving uncertainty around supply channels for the newly commissioned plant.
The NNPC was originally expected to supply Dangote with 300,000 barrels per day (bpd) of discounted crude but has delivered about 82,000 bpd since the refinery’s inauguration, according to S&P Global Commodities at Sea data in August.
The Dangote Petroleum Refinery has said that its Premium Motor Spirit, popularly called petrol, will be exported if the NNPC and other petroleum dealers in the country refuse to patronise it.
Devakumar Edwin, vice president of oil and gas at Dangote Industries Limited, said on Monday that the company’s petrol would be exported if the NNPC and other petroleum dealers in the country refused to patronise it.
“So, the good news for the country is we have started producing PMS from our refinery since Sunday,” he confirmed.
Asked if the petrol would be sold locally, Edwin replied, “Well, I explained how there has been a kind of a blockade from lifting our products within the country. The traders have been trying to block (it), and so now we have been exporting our petroleum products. PMS, we are ready to pump in as much as possible to the country.
“But if the traders or NNPC are not buying the product, obviously, we will end up exporting the PMS as we are doing with the aviation jet and diesel,” he said. (BusinessDay)
