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Dangote accuses IOCs of frustrating crude oil supply to local refineries

THE Dangote Industries Limited (DIL) has accused the International Oil Companies (IOCs) operating in Nigeria of frustrating the supply of crude oil to local refineries including the Dangote Oil Refinery and Petrochemicals.

The Vice President of Oil and Gas at Dangote Industries, Devakumar Edwin, asserted during a one-day training programme for energy editors organised by the Dangote Group.

Edwin’s assertion came barely three weeks after the chairman of the Dangote Group, Aliko Dangote, voiced out the company’s frustration in getting crude oil from the IOCs.

“The NNPC is doing its best, but some of the IOCs are struggling to give us crude, everybody is used to exporting and nobody wants to stop exporting,” Dangote told CNN, an international cable news network.

The DIL vice president said the IOCs intentionally obstructed the Dangote refinery’s efforts to purchase local crude.

He claimed that IOCs were inflating the premium prices above market rates, compelling the Dangote refinery to import crude from distant countries like the United States.

This leads to higher production costs and is unhealthy for the country’s floated foreign exchange market.

“While the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is trying their best to allocate the crude for us, the IOCs are deliberately and willfully frustrating our efforts to buy the local crude.

“It would be recalled that the NUPRC, recently met with crude oil producers as well as refinery owners in Nigeria, in a bid to ensure full adherence to Domestic Crude Oil Supply Obligations (DCSO), as enunciated under section 109(2) of the Petroleum Industry Act (PIA). It seems that the IOCs’ objective is to ensure that our Petroleum Refinery fails.

“It Is either they are deliberately asking for ridiculous/humongous premium or, they simply state that crude is not available,” Edwin was quoted to have said.

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He stressed that at some point, the company had to pay $6 over and above the market price.

“This has forced us to reduce our output as well as import crude from countries as far as the US, increasing our cost of production,” Edwin maintained.

A development economist, Kalu Aja, on his X handle, reacted that it was amazing to hear that the IOCs are manipulating the price of crude oil sold on an open, transparent market in Chicago.

“The end game is to force the Nigerians to cry out and push the IOCs in Nigeria to sell crude oil to Dangote,” Aja said, noting that crude oil is sold via contracts bought in advance or futures.

He expressed worries that Nigeria, the largest oil exporter in Africa, cannot produce enough oil for the Dangote refinery, suggesting that the NNPC Limited support its 20 percent investment by giving Dangote its oil equity.

“This is why multinationals flee Nigeria,” Aja added.

The ICIR reports that section 109(1) of the PIA Act states that the supply of crude oil and condensates for the domestic market shall, subject to subsection (2), be on a willing supplier and willing buyer basis.

The 109(2) states, “The Commission may issue regulations or guidelines on the mechanism for the imposition of a domestic crude oil supply obligation on lessees of upstream petroleum operations, including applicable penalties.”

Earlier in January, the NUPRC mandated oil producers to supply around 483,000 barrels per day (bpd) of crude oil to local refineries for the first six months of 2024.

In its new regulations, ‘Domestic Crude Supply Obligation guidelines,’ the NUPRC allocated a volume of 325,000 bpd to Dangote refinery.




     

     

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    According to a policy analyst, Joe Nwakwue, poor implementation is the most likely challenge in the PIA.

    “There are many reasons that could happen; hijack of the implementation process by special interests, incompetence, etc. One hopes that we are able to faithfully implement the law with its objectives in constant view,” he said.

    The PIA is aimed to overhaul and transform Nigeria’s oil and gas industry.

    On June 12, The ICIR reported that the Dangote refinery scheduled its plans to commence the production and sale of petrol to local marketers amid the concern of NNPCL’s price control regime despite the deregulation of the petroleum downstream sector.

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