Dangote Refinery insists IOCs are irritating its crude provide

The Vice President, Oil and Gasoline, at Dangote Industries Restricted (DIL), Devakumar Edwin, on Wednesday insisted that Worldwide Oil Firms (IOCs) working in Nigeria have constantly pissed off the corporate’s requests for regionally produced crude as feedstock for its refining course of.

The administration of Dangote Industries Restricted disclosed it in a press release on Wednesday.

Mr Edwin’s response got here towards the background of a press release by the Chief Government Officer of Nigerian Upstream Petroleum Regulatory Fee (NUPRC), Gbenga Komolafe.

Mr Komolafe had in an interview on ARISE Information TV mentioned that “it’s ‘faulty’ for one to say that the IOCs are refusing to make crude oil out there to home refiners, because the Petroleum Business Act (PIA) has a stipulation that requires a prepared purchaser prepared vendor relationship.”

Final month, Mr Edwin accused IOCs in Nigeria of doing all the things to frustrate the survival of Dangote Oil Refinery and Petrochemicals.

He mentioned the IOCs are intentionally irritating the refinery’s efforts to purchase native crude by jerking up excessive premium value above the market value, thereby forcing it to import crude from nations so far as the US, with its attendant excessive prices.

On Wednesday Mr Edwin famous that the NUPRC has been very supportive to the Dangote Refinery because it intervened a number of occasions to assist the power safe crude provide.

Nonetheless, he mentioned the NUPRC chief govt was most likely misquoted by some folks therefore his assertion that IOCs didn’t refuse to promote to the corporate.

“To set the data straight, we wish to recap the info beneath. Other than Nigerian Nationwide Petroleum Firm Restricted (NNPC Ltd), to this point we have now solely bought crude immediately from just one different native producer (Sapetro). All different producers refer us to their worldwide buying and selling arms,” Mr Edwin mentioned.

He defined that these worldwide buying and selling arms are non-value including middlemen who sit overseas and earn margin from crude being produced and consumed in Nigeria.

“They aren’t sure by Nigerian legal guidelines and don’t pay tax in Nigeria on the unjustifiable margin they earn. The buying and selling arm of one of many IOCs refused to promote to us immediately and requested us to discover a intermediary who will purchase from them after which promote to us at a margin. We dialogued with them for 9 months and ultimately, we needed to escalate to NUPRC who helped resolve the scenario,” Mr Edwin mentioned.

He added that when the corporate entered the market to buy crude requirement for August, the worldwide buying and selling arms claimed that that they had entered their Nigerian cargoes right into a Pertamina (the Indonesia Nationwide Oil Firm) tender, and it needed to anticipate the tender to conclude to see what remains to be out there.

“This isn’t the primary time. In lots of instances, specific crude grades we want to purchase are offered to Indian or different Asian refiners even earlier than the cargoes are formally allotted within the curtailment assembly chaired by NUPRC,” he mentioned.

Commending the NUPRC for its varied interventions within the oil firm’s crude provide requests from IOCs, and for publishing the Home Crude Provide Obligation (DCSO) tips to enshrine transparency within the oil business, Mr Edwin mentioned “If the DCSO tips are diligently carried out, this may make sure that we deal immediately with the businesses producing the crude oil in Nigeria as stipulated by the PIA.”

He highlighted that when cargoes are supplied to the oil firm by the buying and selling arms, it’s generally at a $2-$4 (per barrel) premium above the official value set by NUPRC.

“For instance, we paid $96.23 per barrel for a cargo of Bonga crude grade in April (excluding transport). The worth consisted of $90.15 dated Brent value + $5.08 NNPC premium (NSP) + $1 dealer premium. In the identical month we have been capable of purchase WTI at a dated Brent value of $90.15 + $0.93 dealer premium together with transport.

“When NNPC subsequently lowered its premium primarily based on market suggestions that it was too excessive, some merchants then began asking us for a premium of as much as $4 million over and above the NSP for a cargo of Bonny Mild. Information on platforms like Platts and Argus exhibits that the value supplied to us is means larger than the market costs tracked by these platforms. We lately needed to escalate this to NUPRC”, Mr Edwin mentioned.

He urged the regulatory fee to take a second have a look at the difficulty of pricing.

“NUPRC has severally asserted that transactions must be on a prepared vendor/ prepared purchaser foundation. The problem nonetheless is that market liquidity (many sellers/ many patrons available in the market on the similar time) is a precondition for this. The place a refinery wants a specific crude grade loading at a specific time then there’s usually just one participant on both facet of the market.

“It’s to keep away from the issue of value gouging in an illiquid market that the home fuel provide obligation specifies quantity obligation per producer and a formulation for transparently figuring out pricing. The truth that the home crude provide obligation as outlined within the PIA has gaps is not any cause for knowledge to not prevail.

“The $2-$4 is per barrel. It is crucial that we specify it so folks perceive the magnitude. With out specifying per barrel could imply it’s simply $2-$4 on the total worth of the cargo, which is insignificant,” he mentioned.