Again, Dangote Refinery accuses IOCs of disrupting crude oil supply.

Dangote Industries Limited’s management has once again accused International Oil Companies (IOCs) of interfering in refinery operations.

According to a statement released on Wednesday, IOCs insisted on selling crude oil to the company’s refinery through foreign agents.

It maintained that the local oil price would continue to rise since trading arms sell cargoes at $2 to $4 per barrel, which is higher than the NUPRC’s official pricing.

“When cargoes are offered to the oil company by the trading arms, it is sometimes at a $2-$4 (per barrel) premium above the official price set by NUPRC,” Mr DVG Edwin, Vice President of Oil & Gas at Dangote Industries Limited, stated.

He praised the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its numerous interventions in oil companies’ crude supply requests from IOCs, as well as for releasing the Domestic Crude Supply.

The company claimed that international oil producers appeared to prioritise Asian countries in selling the petroleum they produced in Nigeria, claiming that the local price of crude will continue to rise since trading arms offer cargoes for $2 to $4 per barrel, which is higher than the NUPRC official pricing.

“For example, we paid $96.23 a barrel for a consignment of Bonga crude grade in April (excluding transportation). The price was calculated using the following formula: $90.15 dated Brent price + $5.08 NNPC premium (NSP + $1 trader premium).

“During the same month, we were able to purchase WTI at a dated Brent price of $90.15 + $0.93 trader premium, including transportation.

“When NNPC lowered its premium in response to market feedback that it was too high, some traders began asking us for a premium of up to $4 million over and above the NSP for a cargo of Bonny Light.”

“Data on platforms like Platts and Argus shows that the price offered to us is way higher than the market prices tracked by these platforms,” according to the statement.

 

See the complete statement below:

Dangote praises NUPRC for posting Domestic Crude Supply Obligation Guidelines.

Trading arms provide cargoes at $2-$4 per barrel, which exceeds the official NUPRC price, causing local prices to rise further.

The company claims that IOCs are not meeting their oil supply demands.

The management of Dangote Industries Limited (DIL) has praised the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its various interventions in the oil company’s crude supply requests from International Oil Companies (IOCs), as well as for publishing the Domestic Crude Supply Obligation (DCSO) guidelines to promote transparency in the oil industry.

Vice President, Oil & Gas, Dangote Industries Limited, Mr. DVG Edwin, stated, “If the Domestic Crude Supply Obligation (DCSO) guidelines are diligently implemented, this will ensure that we deal directly with the companies producing crude oil in Nigeria as stipulated by the PIA.”

Edwin maintained that IOCs operating in Nigeria had continually denied the company’s demands for locally produced petroleum as feedstock for its refining operation.

He emphasised that when cargoes are presented to the oil business by trading arms, they are sometimes at a $2-$4 (per barrel) premium over the official price set by NUPRC. “For example, we paid $96.23 a barrel for a consignment of Bonga crude grade in April (excluding transportation). The pricing was calculated as $90.15 dated Brent price + $5.08 NNPC premium (NSP) + $1 trader premium. During the same month, we were able to purchase WTI at a dated Brent price of $90.15 + $0.93 trader premium, including transportation. When NNPC dropped their premium in response to market comments that it was too expensive, certain traders began asking us for a premium of up to $4 million over and above the NSP for a shipment of Bonny Light.”

“Data from platforms such as Platts and Argus reveal that the price given to us is significantly greater than the market pricing monitored by these platforms. We recently had to raise this to NUPRC,” Edwin stated, urging the regulatory agency to reconsider pricing.

Edwin’s response came against the backdrop of a statement by the Chief Executive Officer of NUPRC, Engr. Gbenga Komolafe, who said in an interview on ARISE News TV that “it is ‘erroneous’ for one to say that the International Oil Companies (IOCs) are refusing to make crude oil available to domestic refiners, as the Petroleum Industry Act (PIA) has a stipulation that calls for a willing buyer-willing seller relationship.”

Edwin stated that, “The NUPRC has been very supportive of the Dangote Refinery, intervening several times to help us secure crude supply.” However, the NUPRC Chief Executive was most likely misquoted by several people, resulting in his remark that IOCs did not reject to sell to us. To put the record straight, we’d like to summarise the facts below.

“Aside from Nigerian National Petroleum Corporation Limited (NNPCL), we have only acquired crude directly from one other local producer (Sapetro). Every other producer refers us to their foreign trading arms.

“These foreign trading arms are non-value-added middlemen who sit in other countries and profit from Nigerian oil production and consumption. They are not subject to Nigerian laws and do not pay tax in Nigeria on the unjustified margins they earn.

“The trading arm of one of the IOCs refused to sell to us directly and advised us to locate a broker who would buy from them and then sell to us at a profit. We talked to them for 9 months before having to escalate to the NUPRC, who helped us address the matter,” Edwin said.

According to him, “When we entered the market to purchase our crude requirement for August, the international trading arms informed us that they had entered their Nigerian cargoes into a Pertamina (the Indonesia National Oil Company) tender, and we had to wait for the tender to end to see what was still available.

“It isn’t the first time. In many situations, specific crude grades that we want to buy are sold to Indian or other Asian refiners before the cargoes are formally allotted in the curtailment meeting held by NUPRC.

“However, we would like to urge NUPRC to reconsider pricing. NUPRC has often said that transactions should be on a willing seller/willing buyer basis. The difficulty is that market liquidity (the presence of multiple sellers and buyers in the market at the same time) is required for this to occur. When a refinery requires a specific crude grade loading at a specific time, there is usually only one participant on each side of the market.

“To overcome the problem of price gouging in an illiquid market, the domestic gas supply obligation stipulates volume requirement per producer as well as a mechanism for transparent pricing determination. “The fact that the domestic crude supply obligation as defined in the PIA has gaps is no reason for wisdom to fail,” Edwin added.