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Dangote refinery: IOCs insist on selling crude via foreign agents

Published

2 months ago

July 18, 2024

Dangote refinery: IOCs insist on selling crude via foreign agents

The Vice President, Oil and Gas, at Dangote Industries Limited (DIL), Devakumar Edwin, on Wednesday insisted that International Oil Companies (IOCs) operating in Nigeria have consistently frustrated the company’s requests for locally produced crude as feedstock for its refining process.

The management of Dangote Industries Limited disclosed it in a statement on Wednesday.

Mr Edwin’s response came against the background of a statement by the Chief Executive Officer of Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe.

Mr Komolafe had in an interview on ARISE News TV said that “it is ‘erroneous’ for one to say that the IOCs are refusing to make crude oil available to domestic refiners, as the Petroleum Industry Act (PIA) has a stipulation that calls for a willing buyer willing seller relationship.”

Last month, Mr Edwin accused IOCs in Nigeria of doing everything to frustrate the survival of Dangote Oil Refinery and Petrochemicals.

He said the IOCs are deliberately frustrating the refinery’s efforts to buy local crude by jerking up high premium price above the market price, thereby forcing it to import crude from countries as far as the United States, with its attendant high costs.

On Wednesday Mr Edwin noted that the NUPRC has been very supportive to the Dangote Refinery as it intervened several times to help the facility secure crude supply.

However, he said the NUPRC chief executive was probably misquoted by some people hence his statement that IOCs did not refuse to sell to the company.

“To set the records straight, we would like to recap the facts below. Aside from Nigerian National Petroleum Company Limited (NNPC Ltd), to date we have only purchased crude directly from only one other local producer (Sapetro). All other producers refer us to their international trading arms,” Mr Edwin said.

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He explained that these international trading arms are non-value adding middlemen who sit abroad and earn margin from crude being produced and consumed in Nigeria.

“They are not bound by Nigerian laws and do not pay tax in Nigeria on the unjustifiable margin they earn. The trading arm of one of the IOCs refused to sell to us directly and asked us to find a middleman who will buy from them and then sell to us at a margin. We dialogued with them for nine months and in the end, we had to escalate to NUPRC who helped resolve the situation,” Mr Edwin said.

He added that when the company entered the market to purchase crude requirement for August, the international trading arms claimed that they had entered their Nigerian cargoes into a Pertamina (the Indonesia National Oil Company) tender, and it had to wait for the tender to conclude to see what is still available.

“This is not the first time. In many cases, particular crude grades we wish to buy are sold to Indian or other Asian refiners even before the cargoes are formally allocated in the curtailment meeting chaired by NUPRC,” he said.

Commending the NUPRC for its various interventions in the oil company’s crude supply requests from IOCs, and for publishing the Domestic Crude Supply Obligation (DCSO) guidelines to enshrine transparency in the oil industry, Mr Edwin said “If the DCSO guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the PIA.”

He highlighted that when cargoes are offered to the oil company by the trading arms, it is sometimes at a $2-$4 (per barrel) premium above the official price set by NUPRC.

“As an example, we paid $96.23 per barrel for a cargo of Bonga crude grade in April (excluding transport). The price consisted of $90.15 dated Brent price + $5.08 NNPC premium (NSP) + $1 trader premium. In the same month we were able to buy WTI at a dated Brent price of $90.15 + $0.93 trader premium including transport.

“When NNPC subsequently lowered its premium based on market feedback that it was too high, some traders then started asking us for a premium of up to $4 million over and above the NSP for a cargo of Bonny Light. Data on platforms like Platts and Argus shows that the price offered to us is way higher than the market prices tracked by these platforms. We recently had to escalate this to NUPRC”, Mr Edwin said.

He urged the regulatory commission to take a second look at the issue of pricing.

“NUPRC has severally asserted that transactions should be on a willing seller/ willing buyer basis. The challenge however is that market liquidity (many sellers/ many buyers in the market at the same time) is a precondition for this. Where a refinery needs a particular crude grade loading at a particular time then there is typically only one participant on either side of the market.

“It is to avoid the problem of price gouging in an illiquid market that the domestic gas supply obligation specifies volume obligation per producer and a formula for transparently determining pricing. The fact that the domestic crude supply obligation as defined in the PIA has gaps is no reason for wisdom not to prevail.

“The $2-$4 is per barrel. It is important that we specify it so people understand the magnitude. Without specifying per barrel may mean it is just $2-$4 on the full value of the cargo, which is insignificant,” he said.

Dangote refinery: IOCs insist on selling crude via foreign agents

Related Topics:crude Dangote refinery Featured IOC

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NNPC hints petrol may rise above N1,000/litre, releases fresh price list

The Nigerian National Petroleum Company Limited (NNPCL) has hinted that the price of premium motor spirit (PMS), also known as petrol, may rise above N1,000 per litre in its retail stations.

In a notice on Monday, NNPC Ltd released estimated prices of petrol (obtained from the Dangote Refinery based on September 2024 pricing) in its retail stations across the country.

According to the notice, the estimated pump prices include Lagos, N950 per litre; Sokoto, N992 per litre; Oyo, N960 per litre; Kano, N999 per litre; Kaduna, N999 per litre; FCT, N992 per litre; Rivers, N980 per litre; and Borno, N1019 per litre.

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The company said in line with the provisions of the Petroleum Industry Act (PIA), petrol prices are not set by the government, but negotiated directly between parties.

“The NNPC Ltd can confirm that it is paying Dangote Refinery in USD for September 2024 PMS offtake, as Naira transactions will only commence on October 1st, 2024.

“The NNPC Ltd assures that if the quoted pricing is disputed, it will be grateful for any discount from the Dangote Refinery, which will be passed on 100% to the general public.” the notice said.

NNPC hints petrol may rise above N1,000/litre, releases fresh price list

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Dangote Refinery: Tinubu committee to announce petrol price on October 1

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Dangote Refinery: Tinubu committee to announce petrol price on October 1

Dangote Group has responded to reports claiming that it sold premium motor spirit (PMS) to the Nigerian National Petroleum Company Limited (NNPCL) at N898 per litre, calling the reports “misleading and malicious.”

In a statement issued by Chief Branding and Communication Officer Anthony Chiejina, Dangote Group did not confirm the specific price at which the product was sold, only stating that it was sold in dollars.

Olufemi Soneye, the NNPCL’s chief spokesperson, had previously stated that the company purchased the PMS at N898 per litre, correcting an earlier report that suggested the price was N760 per litre.

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Dangote’s statement criticized Soneye’s report as intentionally misleading, aimed at undermining the achievement of the Dangote Refinery’s recent milestone in addressing Nigeria’s energy challenges. The statement urged Nigerians to disregard the misleading claims and wait for the official price announcement from the Technical Sub-Committee on Naira-based crude sales to local refineries, which will be made on October 1, 2024.

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JUST IN: Northern regions to pay more for petrol after NNPC announces Dangote price

Published

8 hours ago

September 16, 2024

Trends Admin

Dangote Refinery, Aliko Dangote

JUST IN: Northern regions to pay more for petrol after NNPC announces Dangote price

The Nigerian National Petroleum Company Limited (NNPCL) has announced that petrol sourced from the Dangote Refinery will be sold at prices exceeding N1,000 per litre in northern Nigeria.

According to a statement by NNPC spokesperson Olufemi Soneye, the cost of petrol could reach N1,019 per litre in Borno State and N999.22 in cities such as Abuja, Sokoto, and Kano.

In contrast, the price for petrol in southern regions, including Oyo and Rivers states, will be approximately N960 per litre. Lagos and its surrounding areas will see the lowest price, set at N950 per litre.

The announcement, made in a statement titled ‘NNPC Ltd Releases Estimated Pump Prices of PMS from Dangote Refinery Based on September 2024 Pricing’, provides an overview of the anticipated retail prices across the country.

“The NNPC Ltd has released estimated prices of Premium Motor Spirit, also known as petrol (obtained from the Dangote Refinery) in its retail stations across the country.

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“The NNPC Ltd also wishes to state that, in line with the provisions of the Petroleum Industry Act, PMS prices are not set by the government, but negotiated directly between parties at an arm’s length,” he stated.

The company explained that the product it loaded on Sunday was paid for in dollars.

“The NNPC Ltd can confirm that it is paying Dangote Refinery in USD for September 2024 PMS offtake, as naira transactions will only commence on October 1, 2024.

“The NNPC Ltd assures that if the quoted pricing is disputed, it will be grateful for any discount from the Dangote Refinery, which will be passed on 100 per cent to the general public,” the statement added.

He stated that the estimated pump prices of PMS were obtained from the Dangote Refinery and will be across NNPC retail stations in the country, based on September 2024 pricing.

Recall that the Dangote Group had disagreed with the NNPC on Sunday that it was selling PMS at N898, but it failed to release its price list.