Dangote Refinery Faces Crude Supply Challenges Amidst IOC Concerns

Dangote Industries Limited has raised concerns over the difficulties it faces in securing crude supply for its 650,000-barrel-per-day refinery, attributing the challenges to international oil companies (IOCs). Despite commendations for the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its interventions and guidelines aimed at transparency, Dangote Group insists that IOCs are hindering direct access to locally produced crude.

According to DVG Edwin, Vice President of Oil & Gas at Dangote Industries, IOCs prefer to sell crude through their foreign agents, often at premiums above official prices set by NUPRC. Edwin highlighted instances where prices offered were significantly higher than market rates tracked by industry platforms like Platts and Argus.

“We have consistently faced hurdles when attempting to purchase crude directly from Nigerian producers,” Edwin stated. He further noted instances where Nigerian crude was sold to Asian markets before local refineries could secure allocations, complicating supply arrangements.

Edwin emphasized the importance of implementing the Domestic Crude Supply Obligation guidelines as outlined in the Petroleum Industry Act (PIA), advocating for fair pricing and direct transactions between local refineries and crude producers.

Despite these challenges, recent engagements between Dangote and Nigerian authorities, including the Nigeria National Petroleum Company Limited, have aimed to resolve supply issues ahead of the refinery’s anticipated petrol production launch in August 2024.

The Nigerian government, through NUPRC, has mandated monthly price quotes from oil refiners to ensure transparency and fair dealings under market-determined pricing systems. Meanwhile, the Crude Oil Refiners Association of Nigeria (CORAN) has echoed concerns over IOCs’ indirect sales practices and expressed optimism that ongoing government interventions will rectify the situation.

As discussions continue between stakeholders, Dangote Industries remains hopeful for a sustainable resolution that supports local refining capabilities while aligning with regulatory frameworks.