By Okeke Eunice
Officials from the Dangote Petroleum Refinery and the Federal Government confirmed on Tuesday that the refinery has received four shipments of crude oil from the Nigerian National Petroleum Company Limited (NNPCL) as part of the naira-for-crude sale agreement.
Reports indicate that these four cargoes were delivered to the refinery over the past three weeks since the government initiated crude sales to local refineries in naira.
Sources familiar with the local crude sale arrangement informed our correspondent that the refinery is still awaiting additional cargoes from NNPCL, which oversees the country’s hydrocarbon resources.
They also confirmed that the $20 billion plant in Lekki is now prepared to begin selling refined Premium Motor Spirit, commonly known as petrol, directly to domestic distributors.
A source familiar with the Technical Subcommittee on Domestic Sale of Crude Oil in Local Currency, who wished to remain anonymous due to restrictions on speaking to the media, informed a national television that “additional cargoes of crude will be delivered to the Dangote refinery in the upcoming weeks.”
The official revealed that the program began with the Dangote refinery, currently the only petrol-producing facility in Nigeria.
In a conversation with our correspondent, a senior official at the refinery confirmed this information, stating that the first phase of the naira-for-crude sale agreement is set to last for six months unless renewed by the Federal Government.
The official stated that she was unable to disclose the cost of the crude oil per barrel.
“The naira-for-crude agreement is now in effect. The Dangote refinery has received four cargoes to date, and we are anticipating more. These four cargoes were delivered within the last three weeks, and we expect additional shipments in the coming week.
“Keep in mind that this initial phase of the naira-crude sale lasts only six months. The government may choose to renew it after this period, but we cannot predict what will happen after the first six months.”
It is worth noting that when the refinery, which has a capacity of 650,000 barrels per day, commenced operations a few months ago, it faced challenges with crude supply.
The President of the Dangote Group, Alhaji Aliko Dangote, expressed concerns that some international oil companies were attempting to undermine the investment by refusing to supply crude.
The Dangote Group accused the IOCs of insisting on selling crude to the refinery through their foreign agents.
They also pointed out that the local price of crude would continue to rise, as the trading arms offered cargoes at prices ranging from $2 to $4 per barrel above the official rate.
The group also claimed that foreign oil producers appear to be prioritizing Asian countries for the sale of crude oil produced in Nigeria.
Despite the Nigerian Upstream Petroleum Regulatory Commission’s intervention in July, the group maintained that the international oil companies (IOCs) continued to hinder the refinery’s operations.
Mr. Devakumar Edwin, Vice President of Oil & Gas at Dangote Industries Limited, stated, “If the guidelines for the Domestic Crude Supply Obligation are properly enforced, it will allow us to engage directly with the companies producing crude oil in Nigeria, as outlined in the Petroleum Industry Act.”
Edwin emphasized that IOCs operating in Nigeria have repeatedly obstructed the company’s efforts to obtain locally-produced crude as feedstock for its refining operations.
He noted that when cargoes were offered by the trading arms, they often came with a premium of $2 to $4 per barrel above the official price set by the NUPRC.
“For instance, in April, we paid $96.23 per barrel for a shipment of Bonga crude (excluding transportation costs). This price was composed of a dated Brent price of $90.15, a $5.08 NNPC premium, and a $1 trader premium. In the same month, we purchased WTI at a dated Brent price of $90.15 plus a $0.93 trader premium, including transport. When the Nigerian National Petroleum Company Limited later reduced its premium due to market feedback indicating it was too high, some traders began asking for premiums of up to $4 million over the NSP for a cargo of Bonny Light.
“Data from platforms like Platts and Argus indicate that the prices offered to us are significantly higher than the market rates tracked by these platforms. We recently had to bring this to the attention of the NUPRC,” Edwin stated in July, urging the commission to reassess the pricing issue.
Amid the ongoing controversies, President Bola Tinubu proposed during a Federal Executive Council meeting on July 29 that crude oil be sold to local refineries in naira.
The Federal Executive Council approved Tinubu’s proposal to sell crude to the Dangote refinery and other emerging refineries using the local currency.
The FEC decided that 450,000 barrels designated for domestic use would be sold in naira to Nigerian refineries, starting with the Dangote refinery as a pilot project.
Bayo Onanuga, a media aide to the President, mentioned in July that “the exchange rate will be set for the duration of this transaction.”
It was not immediately clear whether the Federal Government had established the exchange rate for the current transaction with Dangote.
Industry operators have suggested that the price of Premium Motor Spirit (PMS) could significantly decrease if the government sells crude to local refineries at an exchange rate of N1,000 to a dollar, rather than N1,600.
Our correspondent noted that the implementation committee, led by Edun, stated that the sale of crude oil in naira officially began on October 1, as scheduled by the committee.
On September 13, 2024, the committee announced that the Federal Executive Council had approved the sale of crude oil to local refineries in naira, along with the purchase of petroleum products in the same currency.
“Starting October 1, NNPC will begin supplying approximately 385,000 barrels of crude oil per day to the Dangote refinery, with payments made in naira,” the committee stated.
This means that NNPC is expected to deliver about 11.5 million barrels of crude oil to the Dangote refinery each month. Under this arrangement, the refinery will also distribute equivalent amounts of refined diesel and petrol to the domestic market, also priced in naira.
Having received four cargoes, the refinery is anticipated to sell petrol, diesel, and aviation fuel to marketers in naira.