Shell, Total, Mobil, Other Oil Producers Reject Mandate to Sell Crude to Dangote, Other Refineries
- Local oil producers have rejected the call mandating them to sell crude oil to Dangote and other local refineries
- The producers asked the NNPC to use its crude allocation of 445,000 barrels per day to meet the needs of the refineries
- The development follows a directive by President Tinubu to begin the sale of crude oil to Dangote and other local refineries in naira
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
In what has been seen as a blow to the Dangote and other local refineries, oil producers have warned against being compelled to sell crude oil to the refineries.
The producers, under the aegis of the Independent Petroleum Producers Group (IPPG), called on the Nigerian National Petroleum Company Limited to re-direct its assigned crude volumes to the local refineries to mitigate the supply shortage experienced by the refiners.
Source: Getty Images
Crude producers ask NNPC to meet refiners’ needs
The chairman of IPPG, Abdulrazak Isa, disclosed in a letter dated August 16, 2024, and addressed to the chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Ggbenga Komolafe, that the NNPC should use its 445 000 barrels per day intervention crude volume to help the local refineries to meet their targets.
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According to Isa, some group members were already supplying crude to local refineries, insisting that the NNPC is better positioned to meet the supply shortfall facing the local refineries.
Punch reports that Isa said that NNPC has been a historical supplier of crude volume to satisfy the country’s domestic consumption and has always been used to import refined products for domestic consumption.
Isa said:
“Since there is now domestic refining capacity to meet consumption, this dedicated volume should be reserved for all domestic refineries under a price hedge mechanism that can be provided by a suitable financial institution such as Afrexim Bank,’’ he stated.
The IPPG chairman expressed concerns over recent events, including the domestic crude refining needs and crude oil production predictions for the second half of 2024 announced by the NUPRC and the request to oil-producing firms for their monthly quotations for oil supply to licensed refineries in Nigeria.
He said some IPPG members had received letters from the Dangote Refinery for crude supply nominations for October. He faulted the approach, saying it breaches the willing buyer and willing seller model of the Petroleum Industry Act of 2021.
Dangote blames IOCs as Tinubu gives orders
Legit.ng earlier reported that the Dangote Refinery has accused International Oil Companies (IOCs) of refusing to sell crude to them.
The refinery disclosed that the IOCs charge a $3-$4 premium above the international crude oil price.
Reports say President Bola Tinubu directed the NNPC to sell crude oil to Dangote and local refineries in naira.
Recent reports say the sale of crude to the refineries in the local currency will now commence in October.
Experts see further delay if supply shortages continue
Experts believe that if the threats of the producers are taken seriously, it will blow the plans of the Dangote and other refineries to commence production on schedule.
Energy policy expert Adeola Yusuf said the move would severely damage Dangote Refinery, which will soon begin petrol production.
“We know the refinery has been pushing petrol production forward due to crude oil supply challenges. If this is true, it would further worsen the already bad situation.
“It means that the facility will again resort to importing crude, which will impact its running cost and ultimately the product's price when it eventually rolls out the product,” he said.
Oil marketers Speak as 2 refineries set to begin operation
Legit.ng previously reported the Independent Petroleum Marketers Association of Nigeria (IPMAN) had expressed optimism that the Dangote Refinery would begin selling petrol in Nigeria this August, as committed by Aliko Dangote, the chairman of the Dangote Group.
The association also anticipated that the assurance given by the group chief executive officer of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, regarding the Port Harcourt refinery becoming operational this month, would be honoured.
The chairman of IPMAN, NNPC Depot, Ore Western Zone, Shina Amoo, expressed this recently.
Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng
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Source: Legit.ng
