The Nigerian National Petroleum Company (NNPC) Limited must overcome two significant obstacles to fulfill its position as the only off-taker of petrol from Dangote Petroleum Refinery: securing a contract for a steady supply of crude oil and figuring out the right selling price.
The $20 billion Dangote refinery in Lagos will provide the Nigerian market with 25 million litres of petrol per day in September and 30 million litres per day in October, according to a report released on Tuesday by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
According to information obtained by The News Chronicles, the NNPC has not yet developed a solid plan to ensure sufficient supplies of crude feedstock, which would ensure the prompt refining of 25–30 million litres of petrol per day in September.
In a brief interview, a top executive in the downstream company stated, “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.”
Following the NNPC’s formalization of the procedures about the feedstock and price for selling oil in naira, sources said that fuel from the Dangote refinery will be available at filling stations in 48 hours.
“Depending on NNPC, our PMS (Premium Motor Spirit) may be available at filling stations in the next 48 hours,” Dangote Group president Aliko Dangote stated on Tuesday.
The News Chronicles notes that the NNPC has been accused of not providing crude to Dangote and other modular refineries in the area on several occasions.
The refinery needed 15 cargoes of crude oil to run in September, according to Anthony Chiejina, a spokesman for the Dangote Group, but it was unable to get the required amount from the NNPC or foreign oil firms (IOCs) that were operating in Nigeria in August.
“For September, we require 15 cargoes, of which NNPC has allocated six. We’ve failed to get the remaining cargoes despite our appeals to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC),” Chiejina stated in a statement.
On July 11, the NUPRC announced that major oil producers had reached an agreement to create a framework to guarantee a sustainable supply of crude oil to local refineries, emphasizing that the product would be supplied at the market price. This announcement seemed to signal a detente in relations between Dangote and IOCs operating in Nigeria.
Tensions had previously reached a breaking point in June when Dangote executives claimed that IOCs were charging the refinery more than $6 per barrel for crude oil, citing the refinery’s inability to get feedstock due to suppliers’ resistance.
Furthermore, the NNPC, which was formerly anticipated to be among the plant’s major suppliers, has underperformed in comparison to its anticipated deliveries of crude, creating doubt regarding the plant’s supply routes.
According to S&P Global Commodities at Sea statistics from August, the NNPC has only supplied roughly 82,000 barrels per day (bpd) of discounted crude to Dangote since the refinery’s opening, compared to the original expectation of 300,000 bpd.
If the NNPC and other petroleum dealers in the nation refuse to use the Dangote Petroleum Refinery’s Premium Motor Spirit, also known as petrol, the refinery has threatened to export its product.
Dangote Industries Limited’s vice president of oil and gas, Devakumar Edwin, threatened to export the company’s fuel if the NNPC and other national petroleum dealers declined to do business with it on Monday.
He clarified, “So, the good news for the nation is that we have started producing PMS from our refinery since Sunday.”
When asked whether the petrol would be sold nearby, Edwin answered, “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 stated.
