Dangote Industries Limited (DIL) has restated the claim that international oil companies (IOCs) are raising the price of crude oil beyond the market rate, while also supporting the new supply guidelines set by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Mr Devakumar Edwin, the Vice President of Dangote Industries, made these remarks in a statement on Wednesday in Lagos.
According to Edwin, IOCs in Nigeria have consistently hindered Dangote Refinery’s attempts to obtain locally produced crude oil for its refining process.
He mentioned that the trading arms provide cargoes at a price of $2-$4 per barrel higher than the NUPRC’s official rate.
“When cargoes are offered to the oil company by the trading arms, it is sometimes at a $2-$4 (per barrel) premium above the official price set by NUPRC.
“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.
“When NNPC subsequently lowered its premium based on market feedback that it was too high, some traders then started asking us for a premium of up to $4 million over and above the NSP for a cargo of Bonny Light.
“Data on platforms like Platts and Argus shows that the price offered to us is way higher than the market prices tracked by these platforms.
“We recently had to escalate this to NUPRC”, Edwin said.
Dangote backs NUPRC’s supply guideline
In response to NUPRC CEO Engr. Gbenga Komolafe’s statement that it is “erroneous” to claim IOCs are withholding crude oil from domestic refiners under the PIA, Edwin commended the commission’s efforts to resolve supply issues in the sector.
He also praised NUPRC for its interventions in oil companies’ crude supply requests to IOCs and for publishing the Domestic Crude Supply Obligation (DCSO) guidelines to ensure transparency in the oil industry.
He however said: “If the Domestic Crude Supply Obligation (DCSO) guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the PIA.”
What you should know
Nairametrics earlier reported that the CEO of NUPRC, Gbenga Komolafe, stated that International Oil Companies (IOCs) are not refusing to sell crude oil to the Dangote refinery.
Komolafe said that while the Petroleum Industry Act (PIA) makes it obligatory for IOCs and other producers to sell to local refineries like Dangote, the pricing of the crude is based on a willing-buyer/willing-seller basis.
He said that according to the commission’s knowledge, the IOCs are making crude oil available for interested buyers, and the product is abundant.
“Yes, in recognition of the provisions of the Petroleum Industry Act (PIA) that make the supply of crude to domestic refineries obligatory, the commission has enforced that. The issue is not that the IOCs or other producers are refusing to make crude available.
“No producer is refusing to make crude available to the Dangote refinery,” Komolafe said.
Meanwhile, Dangote has consistently accused IOCs to sell and supply crude oil to its massive refinery in Lagos.
The oil company said this refusal has forced them to depend on international suppliers of crude for its refinery.
According to recent reports, about two-thirds of the feedstock of crude in the $19 billion refinery is from the United States.
Recently, the refinery also imported crude from the South American country, Brazil, and it’s planning to further expand its scope to other African oil-producing countries as it ramps up production.