Sources Explain Why Dangote Refinery Missed Timeline to Supply Products, Give Condition to Sell
- Sources have explained why the Dangote Refinery may have delayed going to market with its products
- The NNPCL is currently committed to repaying a $3 billion emergency loan with 164.25 million barrels of crude oil daily
- In addition, sources said that the refinery might have suffered a significant setback as a result of crude oil theft
Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
There are indications that the Dangote Refinery's primary feedstock, crude oil, was in short supply, which may have prevented the 650,000 barrels per day Dangote Refinery from operating at full capacity.
Source: Getty Images
Three sources earlier told Reuters that the first cargo of 65,000 metric tons of sulphur straight-run fuel oil, which Dangote has awarded to Trafigura, is due to load at the end of February. But the refinery missed the timeline.
NNPC not delivering as expected
According to a source familiar with the refinery's operations, the Nigerian National Petroleum Corporation Limited (NNPCL) has not fulfilled its duty to provide the refinery with the necessary amount of feedstock.
While the NNPCL owns 20% of the refinery, the refinery's oil supply was intended to serve the stake; nevertheless, this development has presented a dilemma for NNPCL.
In August 2023, NNPC announced that it had obtained a $3 billion emergency loan from Afreximbank to stabilise the foreign exchange market and support the naira.
Nigeria will pay 11.85% annual interest on the $3.3 billion "pre-export finance facility" that Afreximbank negotiated.
To repay the debt through Project Gazelle, Nigeria committed to exporting 164.25 million barrels of crude oil, or 90,000 barrels per day (bpd), beginning in 2024.
According to the source, a greater portion of the nation's oil production was utilised to pay back loans to some creditors, who wished not to be identified since he was not permitted to comment on the subject.
Crude oil theft on the increase
The source added that the refinery's goals were severely hampered by crude oil theft, which resulted in a significant volume of oil produced by both indigenous and International Oil Companies (IOCs) being taken.
He said:
“For a refinery of that size, what we require to take-off operations is about 6 million barrels of oil. What we have in stock is about that range. But the challenge now is that if we exhaust that stock without hopes of replacement where do we do from there?
“The refinery is not a facility you shut down at intervals if there aren’t planned maintenance, else you end up destroying the facility.
“At the moment, we are only producing Diesel which is not even enough to power out trucks. The development is a setback for the country as most countries within the West coast are already looking forward to the take-off of the refinery because it would save them a lot of cost as as against importing from Europe and other parts of the world due to proximity."
The insider said that while petrol is the main attraction for Nigerians to wait for the refinery, the necessary feedstock was just not available to fire the refinery to production.
Way forward for Dangote Refinery
The Dangote refinery recently revealed intentions to import oil from the US in the upcoming months, indicating that it is unprepared to take a chance on an epileptic supply that could endanger its operations.
The decision by Dangote to look for other sources of feedstock for its operations may have something to do with industry observers' previous concerns that the Nigerian government might not be able to supply the refinery with the necessary amount of crude oil.
They contended that the refinery might suffer a significant setback as a result of crude oil theft and a lack of fresh investment in new oil fields.
Dangote Refinery finally moves to sell products
Legit.ng reported that there are indications that by next week, the Dangote refinery may start selling petroleum products, particularly diesel, to regional distributors.
This development is on the back of a report that the Nigerian National Petroleum Company Limited (NNPCL) has recently resumed selling Premium Motor Spirit (PMS) directly to the Independent Petroleum Marketers Association of Nigeria (IPMAN).
Although though IPMAN currently purchases petrol from NNPCL at the ex-depot price of roughly N600 per litre, the marketers stated that a deal had been made to lift approximately 20 million litres of diesel from the refinery each week.
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Source: Legit.ng
