Dangote Gives Reasons Fuel Prices Will Remain High, Exposes Forces Behind It
- Dangote refinery management has revealed why fuel prices in Nigeria will remain high despite working local refineries
- According to the management of the refinery, international companies are selling crude oil at a high price
- The oil company revealed that IOCs' trading arms often charge a $2-$4 premium per barrel over the official price
Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
Devakumar Edwin, the vice president of Oil & Gas at Dangote Industries Limited, has revealed that international oil companies (IOCs) crude pricing will keep Premium Motor Spirit (PMS) or petrol prices on the high side.
According to Edwin, IOCs continue to sell crude oil to local refiners at above the official market price approved by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
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The Nation reports that Edwin accused the IOCs of frequently imposing a premium of $2 to $4 per barrel over the official price set by NUPRC.
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He said:
“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."
He further explained that following NNPC's adjustment of its premium due to market feedback indicating it was excessive, certain traders began requesting a premium of up to $4 million in addition to the NSP for a shipment of Bonny Light.
Edwin said in a statement:
Data from platforms like Platts and Argus indicates that the prices offered to us significantly exceed market rates.
"We've escalated this to NUPRC, urging a review of pricing issues."
Dangote refinery explains high fuel price
Punch reports that Edwin urged NUPRC to take a second look at the pricing issue if the country wishes to have a reduced petrol price.
Edwin noted that:
“NUPRC has severally asserted that transactions should be on willing seller / willing buyer basis.
"The challenge however is that market liquidity (many sellers / many buyers in the market at the same time) is a precondition for this.
"Where a refinery needs a particular crude grade loading at a particular time then there is typically only one participant on either side of the market.
“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."
Dangote refinery set to begin petrol sale
Legit.ng earlier report that Aliko Dangote confirmed that petrol production had begun at his 650,000-barrel-per-day refinery located in Lagos.
The billionaire also revealed that sales of petrol to Nigerians would commence shortly, adding that marketers had indicated interest.
The refinery is expected to help reduce petrol prices from the current rate of over N700 in the country.
Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.
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Source: Legit.ng
