Emmanuel OchayiOperators in Nigeria’s downstream oil sector have urged the Federal Government to ensure a steady supply of crude oil to the Dangote Petroleum Refinery.
This call comes as independent petroleum marketers opt for cheaper imported refined products over those produced locally by the refinery.
IPMAN Calls for Government Intervention
The Independent Petroleum Marketers Association of Nigeria (IPMAN), has highlighted the high costs of diesel and aviation fuel from the Dangote refinery as a significant deterrent.
Abubakar Maigandi, National President of IPMAN, stated; “The major challenge is the cost of the Dangote diesel. We are looking for a reduction from him. He should bring it to a little bit lower rate.”
Maigandi also criticised Aliko Dangote, President of the Dangote Group, for not collaborating with IPMAN, which he believes could mitigate the $20 billion refinery’s challenges.
“We gave him a policy that he should involve independent petroleum marketers in direct purchases from him. Up till now, he didn’t do that,” Maigandi noted.
High Crude Prices and Importation Challenges
A Dangote Group official, speaking anonymously, attributed the high costs to the necessity of importing crude oil from the United States due to international oil companies (IOCs) in Nigeria selling crude at prices above the global market rate.
“If Dangote gets crude oil locally, there wouldn’t be any issue. You know Dangote is importing with dollars. So, there is no way Dangote will sell below the cost price,” the official explained.
The high costs of importing crude oil are further exacerbated by the Federal Government’s current policies, which allow for importing cheaper but dirtier fuels.
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Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, expressed frustration with the situation, stating, “The decision of the Nigerian Midstream and Downstream Petroleum Regulatory Authority to indiscriminately grant licenses for the importation of dirty diesel and aviation fuel has made the Dangote refinery expand into foreign markets.”
Export Successes Amid Domestic Struggles
Despite domestic challenges, the Dangote refinery has successfully exported over 3.5 billion litres of diesel and aviation fuel to Europe, which accounts for 90% of its output.
Edwin emphasized that the refinery’s goal is to support the Nigerian economy, stating, “The same industry players fought us for crashing the price of diesel and aviation fuel, but our aim, as I have said earlier, is to grow our economy.”
Multinationals’ Role in Supply Issues
Oil marketers have criticized the IOCs for their role in the current situation. According to Maigandi, the IOCs’ decision to sell crude oil to the Dangote refinery at prices $6 per barrel above the global market rate is a clear “anti-country” practice.
The President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, also condemned this practice, calling for the Federal Government to mandate crude oil supply to the Dangote refinery.
Government and Regulatory Responses
While the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has pledged to ensure a consistent supply of crude oil to domestic refiners, implementation has been delayed. Recently, NUPRC CEO Gbenga Komolafe announced a new template guiding the Domestic Crude Oil Supply Obligation (DCSO) to foster seamless crude oil supply to refineries.
Efforts by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to regulate the importation of refined products have also come under scrutiny. Edwin accused the NMDPRA of exposing Nigerians to carcinogenic products by granting licenses for the importation of high-sulfur diesel from Russia.
Future Prospects and Market Dynamics
The ongoing struggle to secure local crude oil supply and the preference for cheaper imported products present significant challenges for the Dangote refinery.
However, the successful export of refined products to Europe highlights the refinery’s potential to contribute significantly to the Nigerian economy if these issues are resolved.
The IPMAN and PETROAN have called on the government to take decisive action to support the Dangote refinery and ensure the availability of affordable, clean fuels for the Nigerian market.
As Maigandi concluded, “The continued support of the Dangote refinery by the Federal Government in terms of supplying crude oil and other necessary assistance will further bring down prices of petroleum products.”
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
