Lagos, July 17, 2024 (NAN) – Dangote Industries Ltd. has praised the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its efforts in addressing the company’s crude supply challenges with International Oil Companies (IOCs).>>>CONTINUE FULL READING HERE....CONTINUE READING THE ARTICLE FROM THE SOURCE
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In a statement on Wednesday, Mr. Devakumar Edwin, Vice President of Dangote Industries, commended the NUPRC for publishing the Domestic Crude Supply Obligation (DCSO) guidelines, which aim to enhance transparency in the oil industry.
Edwin highlighted the importance of these guidelines, stating, “If the DCSO guidelines are diligently implemented, it will ensure direct dealings with companies producing crude oil in Nigeria, as stipulated by the Petroleum Industry Act (PIA).”
He criticized IOCs operating in Nigeria for consistently frustrating Dangote’s requests for locally produced crude to use as feedstock in their refining processes. Edwin revealed that when crude cargoes were offered to the company by trading arms, the prices were often set at a premium of two to four dollars per barrel 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,” Edwin explained. “In the same month, we were able to buy WTI at a dated Brent price of $90.15 + $0.93 trader premium, including transport.”
He added that when the Nigerian National Petroleum Corporation (NNPC) adjusted its premium based on market feedback, some traders began demanding premiums of up to four million dollars over the NSP for a cargo of Bonny Light crude.
Edwin urged NUPRC to reexamine pricing issues, citing data from platforms like Platts and Argus, which showed that prices offered to Dangote were significantly higher than market prices. “We recently had to escalate this to NUPRC,” Edwin said.
His comments followed a statement by NUPRC Chief Executive Officer Gbenga Komolafe on ARISE News TV, where Komolafe remarked that it was “erroneous” to claim that IOCs were refusing to supply crude to domestic refiners. Komolafe also emphasized the PIA’s stipulation for a willing buyer-willing seller relationship.
Edwin clarified that while NUPRC has been supportive of the Dangote Refinery, IOCs have indeed been difficult to deal with directly. He noted that, aside from NNPC, the company had only purchased crude directly from one other local producer, Sapetro. Other producers referred them to their international trading arms, which acted as middlemen, earning margins from crude produced and consumed in Nigeria without being bound by Nigerian laws or paying local taxes on their earnings.
Edwin recounted an incident where the trading arm of an IOC refused to sell directly to Dangote Refinery and suggested using a middleman instead. After nine months of dialogue, the issue was resolved with the help of NUPRC.
“When we entered the market to purchase crude for August, international trading arms informed us they had entered their Nigerian cargoes into a Pertamina (the Indonesian National Oil Company) tender. We had to wait for the tender to conclude to see what was available,” Edwin said.
He urged NUPRC to revisit pricing, stressing that market liquidity is essential for a willing seller-willing buyer basis. Edwin suggested that domestic crude supply obligations should specify volume obligations per producer and a transparent pricing formula to prevent price gouging.
“The fact that the domestic crude supply obligation as defined in the PIA has gaps is no reason for wisdom not to prevail,” Edwin concluded.>>>CONTINUE FULL READING HERE
