Dangote Industries Limited has claimed that international oil companies (IOCs) continue to obstruct crude supply to its 650,000-barrel-capacity refinery. Despite the commendable interventions by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in facilitating crude supply requests and publishing the Domestic Crude Supply Obligation guidelines to promote transparency, the management alleges persistent issues.
In a statement on Wednesday, the Dangote Group accused IOCs of insisting on selling crude oil to its refinery through foreign agents, which drives up local crude prices by $2 to $4 per barrel above NUPRC’s official price. The group further alleged that foreign oil producers prioritize selling Nigerian crude to Asian markets.
Mr. DVG Edwin, Vice President, Oil & Gas, Dangote Industries Limited, stated, “If the Domestic Crude Supply Obligation guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the Petroleum Industry Act.”
Edwin criticized IOCs for frustrating the company’s efforts to secure locally-produced crude for its refining process. He noted that offers from trading arms often included a $2 to $4 per barrel premium above the NUPRC’s official price. Edwin cited an example from April, where the company paid $96.23 per barrel for a cargo of Bonga crude, including various premiums.
Edwin urged the NUPRC to reevaluate the issue of pricing, referencing data from Platts and Argus that showed the prices offered to Dangote were significantly higher than market rates. He expressed concerns over the prioritization of Asian buyers and called for stricter adherence to the Petroleum Industry Act’s guidelines.
In response to comments by NUPRC Chief Executive Gbenga Komolafe, who asserted that it is erroneous to claim IOCs are refusing to supply crude to domestic refiners, Edwin clarified that Dangote has primarily dealt with international trading arms rather than direct local producers. He highlighted that only Sapetro had sold crude directly to the refinery, while other producers referred them to international middlemen.
Edwin also recounted a nine-month negotiation with an IOC trading arm, which eventually required intervention from the NUPRC to resolve. He emphasized the challenges faced when competing against foreign buyers, who often secure Nigerian crude even before formal allocations are made.
Edwin reiterated the need for a transparent and fair pricing mechanism, pointing out that the domestic gas supply obligation includes volume obligations and a pricing formula to prevent price gouging in an illiquid market. He called for similar measures to be applied to crude supply.
Earlier, Alhaji Aliko Dangote, President of the Dangote Group, announced that the refinery is set to commence petrol production in August 2024, following resolutions of its crude oil supply issues with the help of the Nigeria National Petroleum Company Limited and the Federal Government.
This announcement came shortly after the NUPRC stated that Nigerian crude oil producers had committed to ensuring a sustainable supply of crude to Dangote and other local refineries under a market-determined pricing system.
