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Alleged Sabotage on Domestic Crude Oil Supplies: What’s Dangote Refinery Up To?
What’s Dangote Refinery really up to?
The management of the 650,000 barrels per day (bpd) Dangote Refinery last weekend accused International Oil Companies (IOCs) operating in Nigeria of planning to ensure the failure of the $20 billion refining facility. Dangote accuses IOCs of crude oil price manipulation, claims the oil firms are deliberately sabotaging the refinery’s successful operations.
Vice President, Oil and Gas at Dangote Industries Limited (DIL), Devakumar Edwin, said the foreign multinationals were deliberately frustrating the refinery’s efforts to buy local crude by jerking up premium price above the market price, compelling the refinery to import crude from distant countries like the United States, leading to significantly higher costs.
According to Devakumar, “there is a disturbing plot by these IOCs to inflate crude prices and create artificial shortages.
“It would be recalled that the NUPRC, recently met with crude oil producers as well as refinery owners in Nigeria, in a bid to ensure full adherence to Domestic Crude Oil Supply Obligations (DCSO), as enunciated under section 109(2) of the Petroleum Industry Act (PIA). It seems that the IOCs’ objective is to ensure that our Petroleum Refinery fails.
“This has forced us to reduce our output as well as import crude from countries as far as the US, increasing our cost of production,” Edwin said.
This same Dangote Refinery had earlier in the year in its defence of opting for offshore sourcing of its crude feedstock said that “Supply of Nigerian crude is insufficient or unavailable and sometimes unreliable. West Texas Intermediate (WTI) on the other hand, is available, with reliable supply and competitively priced.
“Buying different feed stocks also provides flexibility and optionality for the refinery, so the year-to-end tender for crude purchase from the American market makes economic sense for Dangote.”
As reported, the fear expressed by Dangote was that while NNPC may be able to fulfil the refinery’s crude requirements at this ramp-up stage, it could struggle to exclusively fulfil demand from the plant at full utilization, and this may leave the refiner exposed to supply disruptions.
So which of the narratives do we take now, the initial justification of import substitution or this latest cry? Can somebody please help me understand Nigeria?
This same Dangote management is now coming to tell us that “We keep importing crude from the US because the IOCs refuse to sell to us. That’s the problem. If IOCs could be selling to us, we wouldn’t have any crisis; we would be selling at a price everybody would be happy with. Look at what the dollar is saying now; if we are buying crude at a dollar that exchanges for N1,484, how much do you want us to sell? But if we are getting it in Nigeria, the cost will reduce and it will be cheaper.
“If the Federal Government allows us to buy in Nigeria, it will be cheaper. What we need to do is just to refine and sell. But in this case, we have to import from the US, so it’s very expensive. Some people are just playing politics with this thing to frustrate the refinery.
“We are calling on the federal government and regulators to give us the necessary support in order to create jobs and prosperity for the nation.”
Mobilising all the editors/new media in Nigeria to champion its propaganda campaign against the operating IOCs in Nigeria so they can give you crude oil at your terms is pure mischief and an outright blackmail by Dangote. There’s no other way to put it!
What does Dangote want to achieve by coercing the oil producers to dance to its tune which obviously has nothing to do with patriotism but pure selfish personal business interests that borders heavily on the group’s usual monopolistic attributes?
The same Dangote also lamented that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) was still indiscriminately granting import licences to marketers to import dirty refined products (diesel) into the country. So, suddenly, Dangote Refinery is delving into environmental activism to protect Nigerians. Chai, Nigeria we hail thee!
Roping in the nation’s downstream regulator, the NMDPRA, for allegedly issuing diesel import license indiscriminately “despite the fact that our refinery has enough capacity to meet and surpass in multiple folds Nigeria’s diesel needs and even the need of the entire West African sub-region if crude feedstock is given at reasonable price,” is another well-thought –out mischief at best and at worst a “grey -hart” blackmail.
Dangote’s spirit of monopoly and oppression of the Nigerian market is the only reason why imported diesel is far cheaper than what they get from the refinery that’s in Lagos. How do you explain that?
And the only explanation so far from the company is to pitch Nigerians particularly the editor/media against the operating IOCs and ridiculing the nation’s Downstream regulator, the NMDPRA. In his view, the Dangote group deserved every support from the Nigerian government, especially with the Domestic Crude Supply Obligation (DCSO), as specified in the enabling law, the Petroleum Industry Act (PIA).
Anybody familiar with the workings of the Nigerian oil industry especially the upstream subsector would laugh at this Dangote outcry which weighs more on the side of deceit and blackmail than patriotism. Last time checked, the business transactions and accounting standards in the oil industry remains dollar-based, so is the Dangote Refinery asking the IOCs and even its partner, the NNPCL to sell crude oil to it in Naira? Even if the producers agree to sell the crude in Naira, it’s still going to be at the prevailing global exchange rate of the local currency to the Dollar.
You see where the Dangote people are smart by half! The company is railroading everybody including the Editors of media houses, the very unserious NANS executive amongst others to protest on its behalf, meanwhile Dangote has other things in his mind.
As the company said, “It appears that the objective of the IOCs is to ensure that Nigeria remains a country which exports Crude Oil and imports refined Petroleum Products. They (IOCs) are keen on exporting the raw materials to their home countries, creating employment and wealth for their countries, adding to their GDP, and dumping the expensive refined products into Nigeria – thus making us to be dependent on imported products.
It’s a big shame on the federal government that operators of its system both in the immediate past and present administration have allowed or rather connived with the leadership of the NNPCL to drag Nigeria on this theatre of shame.
How can you be mandating all multinational oil producing companies in Nigeria to supply crude oil to Dangote amongst other domestic refineries as priority off-takers when your own NNPC share of the joint venture produced crude is nowhere to be off-taken?
NNPC independently produces as NPDC, where is their crude output? Up till today no one can say for sure the exact volume the NPDC pumps out on daily basis despite the fact that they had in our recent past acquired some very prolific fields from some of the divesting international operators.
Why are the government people not asking questions on the where about of the nation’s share of the daily joint venture produced crude and the NNPC/NPDC produced crude?
As widely expected, the NNPC a 20 percent equity holder in the Dangote project, was expected to supply the bulk of Dangote’s crude feedstock demands, selling to the refinery at agreed price peg due to its location in the Lekki free zone. So what went wrong with that arrangement?
How do you explain that the Lagos-based Dangote Refinery in which the state-owned oil concern, the Nigerian National Petroleum Company Limited (NNPCL) holds 20 percent equity stake is very early in its life turning to non-Nigerian crude feedstock for its processes?
If Dangote Refinery saw the West Texas Intermediate (WTI) Midland as being a competitive valued barrel, against the FOB Nigerian, how did the NNPCL see its own crude grade to have allowed for the offshore sourcing of the American crude to replace the Nigerian premium basket?
If Dangote Refinery can go to the US to import the crude feedstock for its processes because of cost and availability issues, so what happens to Port Harcourt, Kaduna, Warri, and BUA refineries when they finally come onstream (that’s if the state-owned plants would ever resurrect from the dead)?
The truth Mele Kyari and his men would never tell us is that all the crude NNPC is currently producing both its joint venture shares and produce from NPDC had been sold on FOB basis with huge sums in Dollars collected ahead by few privileged dubious Nigerians that ran the Buhari Presidency and some in and around the Tinubu Presidency.
So anybody shouting about under-production should bury his head in shame because Nigeria is not under-producing at all just that the dubious NNPC leadership and their cronies in the Presidency had conspired to allot themselves and sold off the anticipated produce running into years to come. So we just pump out without getting revenue into our national coffers because some people don chop the money yesterday. What kind of a country is this for God’s sake!
(IFEANYI IZEZE writes from Abuja: iizeze@yahoo.com; 234-8033043009)