Oil Companies Give Dangote Tough Condition to Supply Crude Oil for Refinery Ahead of Operation

• Local oil producers in Nigeria are demanding payment for services in dollar
• It was, however, decided that a conclusion would be reached upon meeting the necessary parties
• They are working to increase capacity to meet the 650,000 barrel by Dangote refinery

Legit.ng journalist Zainab Iwayemi has over 3 years of experience covering the Economy, Technology, and Capital Market.

Nigeria’s Local oil producers have expressed their wishes to be paid by local refiners in US dollars, the currency of their operation.

They made this known in a meeting with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to activate domestic crude supply obligations.

Members want dollar payment

Responding to the request of members for dollar payment, the Chief Executive of the NUPRC, Gbenga Komolafe noted that since the law is based on a willing buyer, willing seller structure, the currency of purchase could be in naira or dollar.

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The parties will need to reach an agreement on the accepted mode for the transactions, he said in a Daily Trust report.

He said:

“We will also escalate to other stakeholders to see how domestic refiners will be able to meet their obligation.”

“We are conscious of the fact that every refinery is configured to take a specific type. We will collate that data and factor obligation concerning the compactable crude type.

Oluwadare Agbelese of Watersmith called for the need to hold a meeting with the NMDPRA and the CBN.

He suggested that off-takers should have priority access to forex to allow them to pay for products in a competitive manner like operators would sell to external off-takers.

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Need to increase capacity

Komolafe noted that the meeting was held to sensitize members on the need to be law-abiding and increase production based on the domestic supply obligations to Nigerian refineries.

He noted that the commission has been meeting the feedstock for modular refineries before now but needs to do more to meet the new demand.

He said,

“Good enough, we have the largest refinery in Africa, that is the Dangote refinery which is ready to commence operations. We have received a request for the 650,000 barrels refinery to guarantee feedstock. So, we believe that it will be a shame if we cannot meet the feedstock of the refinery.”

According to him, this is part of an effort to increase domestic refining capacity given that new refineries are coming up.

Recall also that Legit.ng had reported that the Dangote refinery will sell petrol to Nigeria in Dollars and not Naira.

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According to the report, Dangote Refinery will begin petrol refinery by November 30, 2023. Its diesel and jet fuel operations are however set to commence operation by October 2023, the group’s executive director Devakumar Edwin said.

NNPCL Shuns Dangote Refinery, Swaps Crude Oil for Loan with Others

NPCL secured contracts for crude oil with multiple firms, according to a source within the organisation, Legit.ng earlier reported.

The development hindered the company's initial ability to satisfy Dangote's demand, according to a Punch article.

During a Monday interview with S&P Global Commodity Insights, Devakumar Edwin, the Executive Director of Dangote Group, asserted that the NNPCL had transferred its crude to other entities.

Source: Legit.ng