Nigeria’s 650,000 b/d Dangote refinery has increasingly struggled to source crude feedstock from international oil companies (IOCs), and NNPC its leadership has said.
Speaking to S&P Global Commodity Insights June 24, Devakumar Edwin, Vice President of oil and gas at Dangote Industries, said that IOCs active in Nigeria had been offering crude oil to the refinery at a premium of over $6/b to market price.
“The IOCs are deliberately and willfully frustrating our efforts to buy the local crude. They are either asking for ridiculous/humongous premium[s], or they simply state that crude is not available,” he said.
Dangote Refinery in a statement over the weekend said its concern has always been Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) reluctance to enforce the domestic crude supply obligation and ensure that it receives full crude requirement from NNPC and the IOCs.
For September, it said its requirement was 15 cargoes, of which NNPC allocated six.
“Despite appealing to NUPRC, we’ve been unable to secure the remaining cargoes. When we approached IOCs producing in Nigeria, they redirected us to their international trading arms or responded that their cargoes were committed. Consequently, we often purchase the same Nigerian crude from international traders at an additional $3-$4 premium per barrel which translates to $3-$4 million per cargo,” Dangote Refinery said in a press statement.
What’s the real picture according to oil sources?
Analysts have however pointed to currency weakness and limited access to US dollars as likely challenges for Dangote.
Traders have also noted concern around delayed deliveries to the refinery as a result of alleged payment disputes.
Two tankers carrying WTI Midland previously experienced over month-long wait times before discharging at the refinery in May, with supplier Petrochina reported to have refused payment in the form of refined products, according to a report by S&P Global.
An apparent reluctance to supply the refinery was confirmed by a trader who said a ‘Domestic Crude Oil Supply Obligation’, included no “absolute requirement” to deliver crude to the domestic market if it was not commercially prudent.
To date, Dangote has received 47 cargoes — roughly 170,000 b/d — of Nigerian crude, 20 of them from NNPC.
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