The management of Dangote Industries Limited (DIL) has insisted that international oil companies (IOCs) are frustrating its request to purchase crude feedstock for the Dangote refinery.
In a statement on Wednesday, Devakumar Edwin, vice-president
of oil and gas at Dangote Industries Limited (DIL), said the implementation of
the domestic crude supply obligation (DCSO) guidelines would allow the refinery
to deal directly with companies producing crude oil in Nigeria.
On June 4, Aliko Dangote, Africa’s richest person, said some
international oil IOCs were struggling to supply crude to his refinery.
He said when cargoes are offered to the refinery by the
trading arms, it is sometimes at a $2 to $4 per barrel premium above the
official price set by the Nigerian Upstream Petroleum Regulatory Commission
(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,” he said.
“In the same month, we were able to buy WTI at a dated brent
price of $90.15 + $0.93 trader premium including transport. When NNPC
subsequently lowered its premium based on market feedback that it was too high,
some traders then started asking us for a premium of up to $4m 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. We recently had to escalate this to NUPRC.”
‘APART FROM NNPC, ONLY SAPETRO HAS SOLD CRUDE
TO US’
Speaking on Arise TV on July 15, Gbenga Komolafe, chief
executive officer of the NUPRC, had said “it is erroneous” to say that IOCs are
refusing to make crude oil available to domestic refiners, as the Petroleum
Industry Act (PIA) has provisions that guide willing buyer-willing seller
relationship.
Referencing the interview, Edwin said the NUPRC boss was
probably misquoted by some people “hence his statement that IOCs did not refuse
to sell to us”.
“Aside from Nigerian National Petroleum Corporation Limited
(NNPCL), to date we have only purchased crude directly from only one other
local producer (Sapetro). All other producers refer us to their international
trading arms,” he said.
“These international
trading arms are non-value adding middlemen who sit abroad and earn margin from
crude being produced and consumed in Nigeria. They are not bound by Nigerian
laws and do not pay tax in Nigeria on the unjustifiable margin they earn.
“The trading arm of one of the IOCs refused to sell to us
directly and asked us to find a middleman who will buy from them and then sell
to us at a margin. We dialogued with them for 9 months and in the end, we had
to escalate to NUPRC who helped resolve the situation.
“When we entered the market to purchase our crude
requirement for August, the international trading arms told 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 conclude to see what is
still available.”
Edwin said the incident was not the first time.
He said in several cases, particular crude grades the
refinery intends to buy are sold to Indian or other Asian refiners “even before
the cargoes are formally allocated in the curtailment meeting chaired by
NUPRC”.
“However, we would like to urge NUPRC to take a second look
at the issue of pricing. NUPRC has severally asserted that transactions should
be on willing seller /willing buyer basis,” Edwin said.
“The challenge
however is that market liquidity (many sellers/ many buyers in the market at
the same time) is a precondition for this. Where a refinery needs a particular
crude grade loading at a particular time then there is typically only one
participant on either side of the market.
“It is to avoid the problem of price gouging in an illiquid
market that the domestic gas supply obligation specifies volume obligation per
producer and a formula for transparently determining pricing.”
He said the fact that there are gaps in the domestic crude
supply obligation as defined in the PIA ” is no reason for wisdom not to
prevail”.
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