THE Management of Dangote Industries Limited has insisted that the international oil companies are still frustrating crude supply to its 650,000-capacity refinery.
The management said this even as it commended the Nigerian Upstream Petroleum Regulatory Commission for its various interventions in the oil company’s crude supply requests from IOCs, and for publishing the Domestic Crude Supply Obligation guidelines to enshrine transparency in the oil industry.
In a statement on Wednesday, the Dangote Group alleged that the IOCs insisted on selling crude oil to its refinery through their foreign agents, saying the local price of crude would continue to increase because the trading arms offer cargoes at $2 to $4 per barrel, above NUPRC official price.
The group also alleged that the foreign oil producers seemed to be prioritising Asian countries in selling the crude they produced in Nigeria.
The Vice President, Oil & Gas, Dangote Industries Limited, Mr DVG Edwin, said, “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 insisted that IOCs operating in Nigeria had consistently frustrated the company’s requests for locally-produced crude as feedstock for its refining process.
He stated that when cargoes were offered to the oil company by the trading arms, it was sometimes at a $2 to $4 (per barrel) premium above the official price set by the 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 a $90.15 dated Brent price plus a $5.08 NNPC premium plus a $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 the Nigerian National Petroleum Company Limited 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 $4m 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,” Edwin said, urging the commission to take a second look at the issue of pricing.
Edwin was reacting to a statement by the Chief Executive of the NUPRC, Gbenga Komolafe, who in an interview on national television said, “It is ‘erroneous’ for one to say that the International Oil Companies are refusing to make crude oil available to domestic refiners, as the Petroleum Industry Act has a stipulation that calls for a willing-buyer, willing-seller relationship.”
While noting that the commission had been very supportive of the Dangote refinery as it had intervened several times to help secure crude supply, Edwin, however, insisted that the NUPRC boss might have been misquoted by some people hence his statement that IOCs did not refuse to sell to us.
“To set the records straight, we would like to recap the facts below. Aside from the NNPCL, to date, we have only purchased crude directly from only one local producer, Sapetro. All other producers refer us to their international trading arms. These international trading arms are non-value-adding middlemen who sit abroad and earn a margin from crude being produced and consumed in Nigeria. They are not bound by Nigerian laws and do not pay taxes 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 would 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,” Edwin stated.
He spoke further, “When we entered the market to purchase our crude requirement for August, the international trading arms told us that they had entered their Nigerian cargoes into a Pertamina (the Indonesia National Oil Company) tender, and we 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 urged the NUPRC to take a second look at the issue of pricing, having severally asserted that transactions should be on a willing-seller, willing-buyer basis.
For this to work, he said that there must be market liquidity (many sellers/many buyers in the market at the same time) unlike 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,” Edwin stated.
This newspaper reported earlier that the President of the Dangote Group, Alhaji Aliko Dangote, told editors during a tour of the refinery that the refinery was set to roll out its petrol in August 2024, having resolved its crude oil supply issues through the help of the Nigeria National Petroleum Company Limited and the Federal Government.
Dangote’s comment came a few days after the NUPRC said crude oil producers in Nigeria had committed to working towards a sustainable supply of crude oil to Dangote and other local refineries under a market-determined pricing system.
Both parties had said the commitment aimed to ensure that while the operators (crude oil producers) do business optimally, the refineries are not starved of feedstock.