- Rising uncertainty around pump price of Dangote petrol
By Abubakar Ojima-Ojo
The hope of local fuel consumers for a respite in a steady availability of petrol, and a reduced pump price of petrol still hangs in the balance.
This is on account of the unabated and unjustified buck passing between the regulators and refiners over prompt supply of crude at a regulated price.
This imbroglio persists despite President Bola Ahmed Tinubu’s order for smooth supply of crude in local currency.
The President’s order is apparently not implemented, in addition to perceived breach of the provisions of the Petroleum Industry Act (PIA).
Citizens were hopeful that with the commencement of the Dangote Refinery and other local refiners due to come on board, pump price of fuel will likely reduce.
That hope may not come to pass unless the crude and fuel supply actors are willing and ready to put public and national interests above capitalist interest.
The Nigerian National Petroleum Company Limited (NNPCL), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the International Oil Companies (IOCs) operating as middlemen between NNPCL and local refineries are yet to convincingly resolve the chaotic crude supply regime that threatens Nigeria’s attainment of affordable local fuel supply sufficiency.
The Dangote Group has openly criticized the NUPRC for failing to enforce a key provision of the Petroleum Industry Act (PIA), accusing NUPRC of not delivering the allocated 29 million barrels of crude oil to Dangote Petroleum Refinery and Petrochemicals.
In a press statement released by the Group Chief Branding and Communications Officer, Anthony Chiejina, the management of Dangote expressed frustration over the lack of direct access to crude oil from Nigerian producers, despite a recent allocation announcement.
Dangote Industries Limited management insists that the IOCs are still frustrating crude supply to its 650,000-capacity refinery.
While the management commended the NUPRC for its various interventions in the company’s crude supply requests from IOCs and for publishing the Domestic Crude Supply Obligation guidelines to enshrine transparency in the oil industry, it highlighted ongoing challenges.
“We are in receipt of NUPRC’s statement that they have facilitated the allocation of 29 million barrels of crude oil to the Dangote Petroleum Refinery and Petrochemicals. We would like to thank them for this allocation, but at the same time, we wish to inform them that we have yet to receive these cargoes,” Chiejina said.
“Aside from the term supply we bilaterally negotiated with NNPCL, so far, NUPRC has only facilitated the purchase of one crude cargo from a domestic producer. The rest of the cargoes we have processed were purchased from international traders,” Chiejina added.
“All we are asking for is for refineries in Nigeria to buy crude directly from the companies that produce it in Nigeria, rather than from international middlemen, as specified in the PIA. Unfortunately, the NUPRC has effectively admitted in their statement that they will be unable to enforce the domestic crude supply obligation as specified in the PIA, citing the ‘sanctity of contracts’ as an excuse,” Chiejina said.
Recall that Dangote Petroleum Refinery management had insisted that it was not yet getting enough crude required for the effective optimization of its refinery from the Nigerian National Petroleum Corporation Limited (NNPCL).
In a release signed by Anthony Chiejina, the Refinery Management said, “We, therefore, still insist that we are unable to secure our full crude requirement from domestic production and urge the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to fully enforce the domestic crude supply obligation as mandated by the PIA.”
Chiejina clarified that his company has never accused NNPC of not supplying crude. “Our concern has always been NUPRC’s reluctance to enforce the domestic crude supply obligation and ensure that we receive our full crude requirement from NNPC and the IOCs,” he explained.
“For September, our requirement is 15 cargoes, of which NNPC allocated six. Despite appealing to NUPRC, we’ve been unable to secure the remaining cargoes. When we approached IOCs producing in Nigeria, they redirected us to their international trading arms or responded that their cargoes were committed,” Chiejina said.
“Consequently, we often purchase the same Nigerian crude from international traders at an additional $3-$4 premium per barrel, which translates to $3-$4 million per cargo,” he noted.
Earlier, Africa’s largest refinery publicly criticized the NUPRC and the Nigerian National Petroleum Company Ltd (NNPC) for failing to meet its crude oil supply requirements.
The refinery’s management initially alleged that the NUPRC had not adequately enforced the Domestic Crude Supply Obligation, resulting in significant shortfalls. Specifically, Dangote Refinery claimed that the NNPC had supplied only 33% of the crude oil it was supposed to deliver, causing operational disruptions.
In response, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) rejected claims of complacency in enforcing the Domestic Crude Supply Obligation (DCSO) under the Petroleum Industry Act (PIA) 2021. The regulatory agency emphasized its commitment to ensuring the steady supply of crude oil to local refineries, particularly the Dangote Refinery, amidst ongoing challenges in the oil and gas sector.
“The regulator, as a subject matter an expert, is of the opinion that the arbitrary revocation of licenses is not in the best interest of the country, particularly in the era of low investment arising from the onslaught in energy transition,” the NUPRC stated.
Last month, the NUPRC directed operators to ensure that refineries are not starved of the required feedstock to sustain domestic refining, while the operators continue their business optimally
Operators in the petroleum industry, particularly crude oil producers and managers of refineries, are to provide monthly crude oil price quotes to ensure a sustainable supply of the commodity to local refineries under a market-determined pricing system
CORAN Concerns
Nigerian oil refiners have raised serious concerns about alleged price manipulation and market practices by IOCs, accusing them of obstructing access to affordable local crude.
Edwin, a senior executive at the Dangote Refinery, highlighted the challenges in securing crude oil at fair prices, alleging that trading arms of IOCs often charge a premium of $2 to $4 per barrel above the official price set by the NUPRC.
“We recently paid $96.23 per barrel for Bonga crude in April, which included a $5.08 premium imposed by the Nigerian National Petroleum Company Limited (NNPCL) and an additional $1 from the trader,” Edwin stated.
He expressed concern that even after the NNPCL adjusted its pricing based on market feedback, some traders demanded even higher premiums.
Edwin urged the NUPRC to revisit the pricing mechanisms, emphasizing that the current structure enables IOCs’ trading arms to exploit their position, often acting as middlemen with no added value to the Nigerian economy.
“These trading arms sit abroad, benefiting from crude produced in Nigeria without adhering to local laws or contributing taxes on the profits they earn,” he added.
The issue escalated when Edwin revealed that certain IOCs refused to sell crude directly to the Dangote Refinery, insisting that a middleman be involved, driving up costs. Despite ongoing negotiations and appeals to the NUPRC, the refinery continues to struggle with securing timely and fairly priced crude supplies.
Echoing these concerns, the Crude Oil Refiners Association of Nigeria (CORAN) accused IOCs of bypassing local refineries, opting instead to sell Nigerian crude through their European trading agents.
CORAN’s Publicity Secretary, Eche Idoko, criticized this practice as a violation of the Domestic Crude Supply Obligation, which is intended to prioritize Nigerian refineries in the crude supply chain.
Idoko further explained that the IOCs are making it difficult for local refiners by imposing conditions that favor foreign markets, including demands for payments through A-rated international banks, which are not accessible in Nigeria.
“This essentially forces us to purchase Nigerian crude as if it were an international commodity, placing us at a significant disadvantage,” he noted.
CORAN called on the Nigerian government to enforce its regulations and ensure that local refineries have access to crude at competitive prices.
“If local refineries are forced to import crude due to these unfavorable practices, it will not only hurt the Nigerian economy but also undermine efforts to reduce fuel scarcity and lower fuel prices for Nigerians,” Idoko warned.
Despite multiple attempts to obtain a response from the IOCs, they have remained silent on the allegations. The NUPRC has also been urged to address these issues, ensuring that Nigerian refineries are not starved of essential feedstock due to unfair practices by international oil companies.
As the Dangote Refinery prepares to roll out its petrol production, the ongoing conflict between local refiners and IOCs threatens to impact the availability and pricing of fuel in Nigeria.
Both CORAN and the Dangote Group have called for immediate government intervention to secure a stable and fair supply of crude to local refineries, ensuring that the benefits of Nigeria’s oil resources are fully realized domestically.
What Experts Are Saying
Former Vice President of Nigeria, Alhaji Atiku Abubakar, has alleged that there was a deliberate attempt to frustrate the refinery complex, noting that the plant is a significant private sector project positioned to meet Nigeria’s energy and foreign exchange needs.
“Each parent eagerly awaiting the arrival of a child will dutifully undertake the necessary measures to ensure that the nurturing and development of this precious blessing remain a primary focus. This fundamental principle applies equally to investments, whether they be local or international in nature.
With this understanding, I am cautious in considering any deliberate attempts to impede the progress of the Dangote Refinery, a significant private sector project positioned to meet our energy and forex needs,” Atiku said in a post on his official X handle.
“Alongside numerous fellow citizens of goodwill, I call upon all Nigerians to take resolute actions to provide reassurance that both internal and external forces are not collaborating to prevent us from reaping the benefits promised by this eagerly anticipated transformative endeavor,” he added.
Light Shedrack, an international business ideation specialist, in an interview with Arise TV last week, accused Africa’s richest man, Aliko Dangote, of wanting the Federal Government to bend the standing rules for him, warning that such a move could lead to the exit of international oil companies (IOCs) from Nigeria.
He added that initially, when the feud started, he sided with Dangote but changed his views after conducting due diligence.
Meanwhile, the Dangote Refinery has denied fixing the pump price of its petrol at N600 per litre as reported in a section of the media recently.
A statement by Anthony Chiejina, Group Chief Branding and Communications Officer of Dangote last week said the story was not true and called on members of the public to disregard it.
“Our attention has been drawn to headlines announcing “Marketers Project N600/litre for Dangote Petrol” published in Punch Newspapers of Tuesday August 13,2024.
“We would like to clarify that the Independent Petroleum Marketers Association of Nigeria (IPMAN) is not our business partner yet. We have never discussed price of Premium Motor Spirit (PMS) with them, and they have no mandate or authority to speak for us, either for good or with hidden transcript.
“We urge the public to desist from such speculative announcements. We have our official channels through which we make our views known to our stakeholders,” Chiejina said
