Dangote Petrol: Marketers Anticipate Revised Delivery Schedule

There are significant indications that the Dangote Petroleum Refinery may not commence petrol production today as previously scheduled. Last month, Alhaji Aliko Dangote, President of the Dangote Group, had anticipated that the refinery would initiate petrol production between August 10 and 12, 2024.

However, recent investigations suggest that the refinery, with a capacity of 650,000 barrels per day, may not begin petrol production today.

Nevertheless, several officials associated with the project confirmed on Sunday that preparations are in place for the refinery to start producing the highly anticipated Premium Motor Spirit by the end of August. "Everything is ready. The refinery will produce petrol this month.

However, it is crucial that the refinery maintains a continuous supply of crude to operate without interruption," stated a senior official familiar with the situation, who requested anonymity.

Nonetheless, additional findings indicate that the current crude supply crisis could pose a challenge for the Dangote oil refinery, which is expected to launch the much-anticipated Premium Motor Spirit into the market today.

PMS marketers are currently anticipating the sale of the commodity by the refinery this week. It has been reliably reported that the refinery is making significant efforts to commence petrol production this August, while it awaits the delivery of 29 million barrels of crude oil from the Nigerian Upstream Petroleum Regulatory Commission.

Sources familiar with the situation have informed our correspondent that the refinery is prepared to release petrol this month, despite the ongoing crude oil supply challenges.

These sources, who requested anonymity due to the sensitive nature of the information, indicated that the company is fully equipped to proceed with petrol production as scheduled.

However, they cautioned that the limited supply of crude oil may affect the operation. "I can confirm that we will initiate the sale of PMS this August, although the low crude oil supply has consistently posed challenges.

Nevertheless, based on the information I have, we are completely prepared for the PMS supply," stated one source. Another knowledgeable individual mentioned that the refinery is still waiting for the promised 29 million barrels of crude oil from the NUPRC.

"The NUPRC has yet to deliver the 29 million barrels that were promised to Dangote. They are still in anticipation of that supply. Interestingly, while the allocation of the 29 million barrels was documented, the actual delivery to the refinery has not occurred, despite the NUPRC's recent media statement claiming that the crude was supplied."

“Dangote refinery needs 15 cargoes for September, only six cargoes have been supplied. Where do you want him to get the remaining nine cargoes? He will have to import again. Though the President said local refineries should buy in naira, but if it is at the international rate. What is the difference?” she asked.

Our correspondent has gathered that although Dangote is set to commence the supply of petrol in August, there is a possibility that the product may not be sold locally due to price disparities.

Industry experts familiar with the company have indicated that the current price offered by the Nigerian National Petroleum Company Limited for petrol is not competitive for any trader.

“For Dangote to sell to Nigerians, it has to be at a competitive rate. Dangote will source crude at the international rate, how do you expect him to sell at a rate below the cost price? So, it will be better to sell outside the country than to sell in Nigeria at a loss.

“There is a lot of politics in oil and gas, and this is heavily killing Nigeria. Just like former President Olusegun Obasanjo said, those making money from fuel importation are frustrating Dangote,” the expert said anonymously.

Certain refinery employees, who spoke to our reporter on the condition of anonymity, indicated that preparations for the sale of petrol are complete. However, they were unable to provide specific details regarding the exact date and pricing.

“I learnt PMS will be out probably by next week, but I don’t know the exact date,” one of the workers disclosed, pleading not to be mentioned because he was not authorised to speak to the press.

The Dangote refinery and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) engaged in a discussion regarding the alleged supply of 29 million barrels of crude oil to the refinery.

The Dangote Group asserted that the NUPRC had not adequately enforced the Domestic Crude Supply Obligations regulations, resulting in insufficient local crude oil supply to the refinery.

In response, the NUPRC refuted the claim, stating that it had facilitated the supply of over 29 million barrels of crude oil to Dangote between January and June 2024.

The NUPRC emphasized Its role in facilitating the domestic supply of crude oil to Dangote refinery and other refineries through the monthly production curtailment platform.

“A breakdown shows that nine refineries have benefitted from the 32,088,122 barrels of crude as Dangote alone enjoyed 29,047,098 barrels out of the total supply between January to June 2024.”

According to the commission’s report, the Warri refinery received approximately 949,670 barrels of crude oil. Furthermore, the NDPR refinery obtained 823,395 barrels, while the Port Harcourt refinery received 471,123 barrels. Additionally, Seplat-WPSOL refinery was allocated 419,541 barrels, and Waltersmith-WSPOL refinery obtained 296,353 barrels.

Other beneficiaries include the Edo refinery, which received 58,504 barrels of crude oil, and Du-port refinery, which obtained 22,438 barrels.

The commission emphasized its commitment to fulfilling its mandate and, if necessary, may consider withdrawing licenses. However, such actions would not be taken arbitrarily or without due consideration, as the sanctity of contracts must be upheld.

In response to these reports, the Dangote Group firmly denies receiving 29 million barrels of crude oil from any source.

 

A representative of the Dangote Group, Anthony Chiejina, previously stated that, “We receive 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 let them know that we are yet to receive these cargoes.

“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 further stated that the sole request made by the refinery was for Nigerian refineries to procure crude directly from Nigerian production companies instead of international intermediaries.

“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 ‘sanctity of contracts’ as an excuse,” Chiejina stated.

On Sunday, the NUPRC representative, Olaide Shonola, informed our correspondent during a conversation that the commission was investigating the refinery’s assertions that the designated 29 million barrels had not been received.

“We are looking into this,” Shonola said, promising to revert later.

As August unfolds, there is growing concern among Nigerians regarding the ability of the Dangote refinery to deliver petrol this month, as previously assured by Alhaji Aliko Dangote, the President of the Dangote Group. This apprehension arises from the ongoing crude oil shortage that has plagued the facility since it began operations a few months ago.

Since the refinery initiated the sale of diesel and aviation fuel in April, Dangote has had to delay the supply of petrol on three separate occasions. In May, he informed the public that fuel imports would cease entirely in Nigeria once the refinery commenced petrol sales in June.

During the Africa CEO Summit held in Rwanda, Dangote reiterated his commitment, stating that the refinery would eliminate the need for Nigeria to import an average of one billion litres of petrol monthly starting in June.

He emphasized that, according to the operational plans of the Dangote refinery, Nigeria would no longer require petrol imports beginning in June, asserting, “Currently, Nigeria has no reason to import anything except gasoline, and by June, within the next four to five weeks, Nigeria should not import any gasoline; not even a single drop.”

“We have enough gasoline to give to at least the entire West Africa; and diesel to give to West Africa and Central Africa. We have enough aviation fuel to give to the entire continent and also export some to Brazil and Mexico.

“We have started producing jet fuel, we are producing diesel, and by next month (June), we’ll be producing gasoline. What that will do is that it will be able to take most African crude.”

In June, Mr. Dangote notified the Nigerian public that his plan to introduce petrol into the market during that month would no longer be feasible, eliciting reactions from Nigerians.

During a tour of the facility with Governor Babajide Sanwo-Olu of Lagos State and other esteemed individuals, he made the following announcement: “We encountered a slight delay, but PMS will commence distribution between July 10^th and 15^th.

However, we intend to store it in tanks to ensure proper settling. Consequently, by the third week of July, we will be able to release it Into the market,” Mr. Dangote had stated.

Regrettably, this did not materialize in July as Dangote once again informed the press that the supply of petrol was affected by a fire incident that occurred at the refinery’s effluent treatment plant on June 26^th. He indicated that the product would be available between August 12^th and 15^th.

In the meantime, petroleum marketers in Nigeria are eagerly awaiting communication from the refinery regarding the commencement of petrol release.

Both major and independent marketers have expressed keen interest in procuring PMS from Dangote, particularly after years of relying solely on the Nigerian National Petroleum Company Limited for petrol supply.

The Executive Secretary of the Major Energies Marketers Association of Nigeria, Clement Isong, confirmed to The PUNCH on Sunday that the major marketers are patiently awaiting further information from the Dangote Group.

As per his statement, MEMAN members are presently procuring PMS from the NNPC, while the majority of them obtain diesel and aviation fuel from the Dangote refinery.

“We are still waiting for them. Currently, it is only the NNPC that imports PMS because of the price differential. So, we are waiting (for Dangote refinery).

“Currently, we are all buying AGO (diesel) and ATK (aviation fuel) from the Dangote refinery. To the best of my knowledge, marketers are not buying PMS yet,” Isong stated.

The Dangote Group's management has expressed concerns regarding the alleged hindrance of crude supply to its 650,000-capacity refinery by International Oil Companies (IOCs).

The group asserts that the IOCs insist on selling crude oil to its refinery through their foreign agents, resulting in an increase in the local price of crude.

This is because the trading arms of these IOCs offer cargoes at a premium of $2 to $4 per barrel above the official price set by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Additionally, the group alleges that foreign oil producers appear to prioritize Asian countries when selling the crude they produce in Nigeria.

Devakumar Edwin, the Vice President of Oil & Gas at Dangote Industries Limited, stated, “The effective implementation of the Domestic Crude Supply Obligation guidelines will enable us to engage directly with the companies producing crude oil in Nigeria, as mandated by the Petroleum Industry Act.”

He emphasized that International Oil Companies (IOCs) operating within Nigeria have repeatedly hindered the company’s efforts to secure locally sourced crude for its refining operations.

Edwin pointed out that when cargoes were presented to the oil company by trading divisions, they were often priced at a premium of $2 to $4 per barrel above the official rate established by the Nigerian Upstream Petroleum Regulatory Commission.

His comments were in response to remarks made by Gbenga Komolafe, the Chief Executive of the NUPRC, who claimed in a national television interview that it is “erroneous” to assert that IOCs are unwilling to supply crude oil to domestic refiners, noting that the Petroleum Industry Act promotes a willing-buyer, willing-seller framework.

The Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, refuted the assertion made by a Dangote official, emphasizing that Nigeria cannot solely depend on the Dangote refinery to meet its fuel supply needs.

Furthermore, Ahmed raised concerns regarding the quality of Dangote diesel, alleging that it contains a higher sulphur content compared to imported diesel.

In response, the President of the Dangote Group, Aliko Dangote, vehemently denied the allegations, questioning how he could be considered a monopoly when the Nigerian National Petroleum Company Limited (NNPC) is simultaneously investing $4 billion in the renovation of government-owned refineries.

Subsequently, President Bola Tinubu issued a directive to the NNPC to facilitate the sale of crude oil to Dangote in Nigerian naira.

Oil marketers involved in the matter urged the NNPC and the International Oil Companies to expedite the process of supplying crude oil to local refineries in both naira and sufficient quantities.

In response to the assertion made by Dangote and other domestic refiners that they had yet to receive crude in naira and as needed, the National Publicity Secretary, Chief Ukadike Chinedu, stated, “I believe the NNPC is handling this matter effectively.”

“However, I must state that they need to expedite action to ensure that crude oil is sent to the refineries. But you need to understand that the process of getting something from the government does not happen easily, some processes must be followed.

“While we admit that there are processes, we are advising those implementing these processes to hasten it up so that the refineries will start refining as quickly as possible and bring down the costs of these petroleum products which have remained a burden on Nigerians.

“It is not sensible that we are an oil-producing country and refined products are still high in our nation, and we are still importing from other refineries when we have refineries in Nigeria. We have to act and it has to be fast.”

In addition, the National Operations Controller of IPMAN, Mustapha Zarma, urged NNPC and IOCs to make every effort to provide domestic refineries with crude oil in both naira and the necessary quantities.

He emphasized the substantial positive impact that domestic crude oil supply would have on the local currency and the Nigerian economy.

The President's directive regarding the provision of crude oil to Dangote and other domestic refineries is a positive advancement that is likely to bolster the value of the naira. This is primarily due to the significant demand for foreign exchange originating from the petroleum industry.

Consequently, if the refineries are able to procure crude oil using the naira, it is anticipated that the pressure on the naira will diminish. This initiative is one that should be actively pursued by both the oil-producing companies and the Nigerian National Petroleum Corporation (NNPC).

Furthermore, it is essential that they work diligently to ensure a consistent supply. While the implementation of this directive may not be immediate due to the necessary processes involved, it is crucial that it is expedited to prevent further depreciation of our local currency, as emphasized by Zarma.