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Dangote insists IOCs frustrating crude oil supply demands to refinery

THE management of Dangote Industries Limited (DIL) has insisted that the International Oil Companies (IOCs) operating in Nigeria consistently frustrated the company’s requests for locally-produced crude as feedstock for its refining process.

The company also informed that the IOCs offered a higher price above the market price to the refinery.

The vice president of oil and gas at Dangote Industries,  DVG Edwin, made this claim in a statement on Wednesday, July 17.

According to Edwin, the local price of crude oil will continue to increase because of trading arms offer of cargo at $2 to $4 per barrel, above the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) official price.

“If the Domestic Crude Supply Obligation (DCSO) guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the PIA,” Edwin stated.

He cited that data on platforms like Platts and Argus showed the price offered to the Dangote Refinery was way higher than the market prices tracked by the platforms.

“As an example, we paid $96.23 per barrel for a cargo of Bonga crude grade in April (excluding transport). The price consisted of $90.15 dated Brent price + $5.08 NNPC premium (NSP) + $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 NNPC 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 $4 million over and above the NSP for a cargo of Bonny Light,” he said

Edwin hinted that the company had recently escalated the challenge to NUPRC, urging the commission to take a second look at the issue of pricing.

Recall, the Chief Executive Officer of NUPRC, Gbenga Komolafe, had in an interview on ARISE News TV said it was ‘erroneous’ for anyone to say that the IOCs were refusing to make crude oil available to domestic refiners, as the Petroleum Industry Act (PIA) has a stipulation that calls for a willing buyer-willing seller relationship, Edwin noted.

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He said the NUPRC had intervened at various times to help the Dangote Refinery secure crude supply.

“Aside from Nigerian National Petroleum Corporation Limited (NNPCL), to date, we have only purchased crude directly from one other 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 margin from crude being produced and consumed in Nigeria. They are not bound by Nigerian laws and do not pay tax 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 said.

He disclosed that when the Dangote Fefinery entered the market to purchase its crude requirement for August, the international trading arms told the company it had entered their Nigerian cargoes into a Pertamina (the Indonesia National Oil Company) tender and that Dangote 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,” Edwin said.

    Urging the commission to take a second look at the issue of pricing, he added, “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 added.

    The ICIR reported that the Dangote Refinery announced that the production of premium motor spirits (PMS) would start coming out by 10 to 15 July but the company had postponed it to August.

    The refinery has been sourcing crude oil from the United States, The ICIR also reported.

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