Dangote refinery, NUPRC trade words over crude oil allocation

The crude crisis rocking the Dangote Oil Refinery took a new twist on Friday as the refinery engaged in an exchange of words with the Nigerian Upstream Petroleum Regulatory Commission.

The According reports that the Dangote Group on Thursday, accused the NUPRC of failing to enforce the Domestic Crude Supply Obligations effectively, saying it is yet to get enough crude locally.

Reacting, the NUPRC debunked the claim on Friday, stating that it facilitated the supply of over 29 million barrels of crude oil to Dangote Refinery from January to June 2024.

However, in a swift response, the Dangote Refinery said it did not receive any 29mb of crude.

The commission, in a statement signed by its management on Friday, explained that as part of its commitment to ensure the enforcement of Section 109 of the Petroleum Industry Act, 2021, nine refineries were supplied crude despite low crude oil production.

The commission said its strategic commitments to Nigeria’s energy security had led to the supply of 32 million barrels of crude to Dangote Refinery and other local producers in the first half of 2024.

“The NUPRC, in its effort to enforce Section 109 of the PIA 2021 has developed and gazetted Regulation of the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023. The NUPRC took an additional step to ensure that crude producers furnish the commission with copies of all crude oil sales and purchase agreements entered or any security interest entered, that is tied to crude oil production.

“The commission on several occasions has also engaged Dangote and local refiners to ensure their supply quota is met in line with the provisions of the PIA. For effective implementation of the DCSO, the NUPRC established a working committee comprising of NUPRC, the Oil Producers Trade Section, the Independent Petroleum Producers Group, the Crude Oil Refinery-Owners Association of Nigeria and the NNPC Upstream Investment Management Services.”

The NUPRC argued that it had facilitated the domestic supply of crude oil to Dangote Refinery and other refineries using 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,” it added.

According to the commission, the Warri Refinery received 949,670 barrels; NDPR-Refinery got 823,395 barrels of crude; the Port Harcourt refinery received 471,123 barrels; the Seplat-WPSOL refinery was allocated 419,541 barrels while the Waltersmith-WSPOL refinery got 296,353 barrels.

Other beneficiaries included the Edo Refinery which got 58,504 barrels of crude and the Du-port refinery which got 22,438 barrels of crude.

It added that in the pursuit of its mandate, if it becomes necessary for licences to be withdrawn, the commission will do so but it will not resort to the ‘presumptuous and arbitrary’ withdrawal of licences because of the sanctity of contract.’

“The regulator as a subject matter expert is of the opinion that arbitrary revocation of licences is not in the best interest of the country particularly in the era of low investment arising from the onslaught in energy transition,” it added.

Dangote refinery reacts

Meanwhile, the management of the Dangote Petroleum Refinery continued to urge the NUPRC, to enforce the domestic crude supply obligation as specified in the Petroleum Industry Act, maintaining that refineries in Nigeria should be allowed to buy crude directly from the companies that produce it in Nigeria rather than from international middlemen, as enshrined in the PIA.

Spokesperson for the Dangote Group, Anthony Chiejina, said Friday night, “We are in receipt of 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 added that all the refinery is asking for is for refineries in Nigeria to buy crude directly from the companies that produce it in Nigeria rather than from international middlemen.

“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 concluded.

The According recalls that the management of the Dangote Group had alleged that the IOCs were still frustrating crude supply to the 650,000-capacity refinery.

The group alleged that the IOCs insisted on selling crude oil to its refinery through their foreign agents, saying the local price of crude will continue to increase because the trading arms offer cargoes at $2 to $4 per barrel, above NUPRC’s official price.

The group also alleged that the foreign oil producers seem to be prioritising Asian countries in selling the crude they produce in Nigeria.

The Vice President, Oil & Gas, Dangote Industries Limited, 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 have consistently frustrated the company’s requests for locally-produced crude as feedstock for its refining process.

He highlighted that when cargoes are offered to the oil company by the trading arms, it is sometimes at a $2 to $4 (per barrel) premium above the official price set by the Nigerian Upstream Petroleum Regulatory Commission.

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.”

The Chief Executive of Nigerian NMDPRA, Farouk Ahmed, debunked the claim, saying Nigeria could not rely heavily on the Dangote refinery for its fuel supply.

Ahmed said Dangote diesel has a higher sulphur content than the ones imported into the country.

According to him, the refinery had requested the regulator to stop giving import licences to other marketers to be the only fuel supplier in Nigeria.

“We cannot rely heavily on one refinery to feed the nation, because Dangote is requesting that we should suspend or stop importation of all petroleum products, especially AGO and direct all marketers to the refinery, that is not good for the nation in terms of energy security. And that is not good for the market, because of monopoly,” Ahmed stressed.

But the President of the Dangote Group, Aliko Dangote, denied the allegation, wondering how he could be a monopoly when the Nigerian National Petroleum Company Limited is renovating government-owned refineries with $4bn.

President Bola Tinubu has since ordered the NNPC to sell crude oil to Dangote in naira.