FESTUS OKOROMADU cross-examines the allegations that international oil companies operating within the shores of Nigeria are stifling local production of petroleum products which has aggravated the pains of Nigerians.
The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, was the first to fire a shot when he described as erroneous claims that International Oil Companies are refusing to make crude oil available to domestic refiners of petroleum products.
The NUPRC CEO, while speaking on national television recently, said that it is “erroneous” for one to say that the International Oil Companies (IOCs) are refusing to make crude oil available to domestic refiners.
However, he emphasised that the Petroleum Industry Act (PIA) has a stipulation that calls for a willing buyer-willing-seller relationship.
Responding to the accusations by various local refineries, including Dangote Refinery, that IOCs are refusing to sell crude oil to local refineries, the NUPRC boss, said, “The issue is not that the IOCs or other liaises, other producers are refusing to make crude available. So, to the best of the knowledge of the commission, there is nothing like IOCs being too big or not complying with their statutory obligations to make crude available.
“I think that is erroneous and I need to make that very clear. So, the IOCs and other producers, none of them are refusing to comply with the provisions of the law of the Federal Republic of Nigeria, and the commission is in no way shying away from this, so that needs to be made very clear.”
Expatiating on the provision in the PIA that made it obligatory for IOCs to sell crude to refiners, Komolafe said, “Section 109 of the Petroleum Industry Act, which is one of the buildings of the PIA as a comprehensive legislative instrument to govern the oil and gas industry. Section 109 of the act provides for enforcement of domestic crude oil obligation.
“When the Nigerian National Petroleum Company Limited 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”
“And I want to say that the Nigerian Upstream Petroleum Regulatory Commission, as the technical and commercial regulator for the industry actually proactively came out and brought together the producers and the refiners, including NNPC, and made it obligatory that they- that is, the producers- must ensure that they make crude available to the domestic refiners.
“So, what happens in this respect is that the NUPRC receives the volume of the domestic requirement from its sister agency, the Nigeria Mid and Downstream Petroleum Regulatory Agency, and factors this volume to the various liaises, that is, the various producers, and ensure that they make available this obligation to the domestic refiners.”
However, some Nigerians see the attempt by the NUPRC boss to dismiss claims that the IOCs are exhibiting uncooperative attitudes towards local refiners as unfortunate.
More so it is coming from a government agency whose main focus should be how to encourage local refining of the nation’s crude oil at a time like this.
In what appears as a battle of wits, the management of Dangote Industries Limited swiftly responded via a comprehensive statement detailing the complexity of its experiences in trying to source crude locally via a press statement.
On Wednesday, July 17, 2024, Dangote Industries Limited issued a press statement insisting that the IOCs are still frustrating crude supply to its 650,000-capacity refinery.
The Dangote team while relying on their expertise and experience in dealing with government officials in Nigeria, first commended the management of NUPRC for its various interventions in the oil company’s crude supply requests from IOCs, and for publishing the Domestic Crude Supply Obligation guidelines to enshrine transparency in the oil industry.
The Dangote Group then went ahead to allege that the IOCs insisted on selling crude oil to its refinery through their foreign agents. The process, according to them, leads to an increase in the price of local crude because the IOCs involve trading arms which offer cargoes at $2 to $4 per barrel, above NUPRC’s official price.
The Dangote group also alleged that the foreign oil producers seemed to be prioritising Asian countries in selling the crude they produced in Nigeria.
While appreciating the intent of the domestic crude supply obligation of the PIA, but faulting its implementation, Vice President, Oil & Gas, Dangote Industries Limited, DVG Edwin, said, “If the Domestic Crude Supply Obligation guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the Petroleum Industry Act.”
Edwin insisted that IOCs operating in Nigeria had consistently frustrated the company’s requests for locally-produced crude as feedstock for its refining process.
He lamented that when cargoes were offered to the oil company by the trading arms, it was sometimes at a $2 to $4 (per barrel) premium above the official price set by the 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 a $90.15 dated Brent price plus a $5.08 NNPC premium plus a $1 trader premium. 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 the Nigerian National Petroleum Company Limited 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,” Edwin said, urging the Commission to take a second look at the issue of pricing.
Although Edwin acknowledged the fact that NUPRC had been very supportive of the Dangote Refinery as it had intervened several times to help secure crude supply, he however, disagreed with the NUPRC boss’s statement that IOCs did not refuse to sell to local refiners.
“To set the records straight, we would like to recap the facts below. Aside from the NNPCL, to date, we have only purchased crude directly from one local producer, Sapetro.
“All other producers refer us to their international trading arms. These international trading arms are non-value-adding middlemen who sit abroad and earn a margin from crude being produced and consumed in Nigeria. They are not bound by Nigerian laws and do not pay taxes 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 would buy from them and then sell to us at a margin. We talked with them for nine 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. This is not the first time.
“In many cases, particular crude grades we wish to buy are sold to Indian or other Asian refiners even before the cargoes are formally allocated in the curtailment meeting chaired by NUPRC,” Edwin said.
Allegations of sabotage
According to a Lecturer of Economics at the University of Abuja, Dr. Olanrewaju Aladeitan, recent reports emanating from government agencies on the Dangote Refinery call for concern.
“First it was the Nigerian National Petroleum Company Limited (NNPCL) which insisted that it obtained over $1b loan to acquire a 20 percent stake in the Dangote refinery. Only for Dangote to come out recently that NNPCL’s holding in the company is a mere 7 percent.
“The question is at what point the NNPCL decided to stop its investment after telling the nation then that the main reason for partnering with Dangote was for security. Why is the NNPCL not explaining the details of its involvement?
“The management of NNPCL also needs to explain what happened to the loans obtained to invest in the company.”
On the refusal of IOCs to sell crude oil to Dangote, he said the development is not encouraging, adding that NUPRC must ensure the full implementation of the domestic crude supply obligation guidelines to encourage investment in the downstream sector of the nation’s oil industry.
He expressed reservations about the prospect of attracting investors into the industry if Africa’s richest man, Dangote, is treated the way it is reported.
“Why do we think we can ask foreigners to come and invest their hard-earned money in a country where the richest black man in the world is being stifled and ridiculed like a nobody?
“Dangote may not be some person’s ideal businessman for the obvious reason that he enjoyed monopoly and patronage from successive governments, since 1999 at least, but what we are faced with now is how to address the energy crisis at hand.
“What is happening can best be described as a systemic sabotage, unfortunately, if that is the situation, the country will suffer for it.
Whatever happens, Dangote will buy crude and refine, he will then sell at the price that allows him to make a profit.”
On his part, an energy analyst, Femi Oke, argued that the issues around the full commencement of production by Dangote Refinery appeared to be deeper than what is to be disclosed to the public.
“Every nation takes its “energy security” seriously, but not Nigeria. The regulator made wild accusations on television, and we expect the Dangote Group to respond.
“There appears to be a cold war between the government and Dangote, recall that Dangote complained about crude supply. He complained about a 30 percent interest rate. He complained about the CBN exchange rate. He complained about manipulations by IOCs.
“All of a sudden, we are told that the NNPCL did not go through with their 20 percent stake in the Dangote Refinery, there is more than meets the eyes. There is no smoke without fire,” he said.
Oke, however advised Dangote to urgently embark on backward integration since he has been allocated two very lucrative OPLs by the previous government, why is he not drilling crude?
Speaking about the need for the government to address the poor performance of the nation’s downstream sector, he said, “We have three national refinery and Petrochemical plants with a combined refining capacity of 445,000 barrels a day, that belong to all of us, Nigerians.
“Why is the government and its agencies not so vociferous in compelling the NNPCL to make them work?
“Nigeria loses over N120 billion annually running those refineries that refine nothing.
“Why are Nigerians not too concerned about making an asset that we jointly own to work, the way they are about a private concern?” he queried.
NASS plans intervention
Meanwhile, the House of Representatives has ordered an investigation into the ongoing crisis between IOCs and Dangote Refinery over the alleged sabotage. The move followed a matter of urgent national importance raised by the Minority Leader, Kingsley Chinda.
The House also ordered the determination of the actual percentage holding of the Federal Government in the refinery.
“What is happening can best be described as a systemic sabotage, unfortunately, if that is the situation, the country will suffer for it”
It also resolved to investigate the alleged inability of NNPCL to subscribe for the 20 percent shares in the refinery and the lack of supply of crude oil to the firm.
The House also urged the government, the Nigeria Upstream Petroleum Regulatory Commission, Nigeria Midstream and Downstream Regulatory Agency, key stakeholders and well-meaning Nigerians to support Dangote Refinery to succeed.
Leading debate on the motion, Chinda said, “There is a need to investigate alleged conspiracy by international oil companies (IOCs) to frustrate the operations and survival of Dangote Refinery and the actual percentage holding of the Federal Government in Dangote Refinery.”
Fuel price escalates
While the debate as to sabotage or otherwise now takes a centre stage, the nation’s economy suffers due to the government and its agencies’ failure to ensure local refining of crude oil; citizens will continue to pay higher prices for petroleum products.
According to recent reports from the Major Oil Marketers Association of Nigeria, the landing cost of Premium Motor Spirit (PMS), commonly known as petrol, was N1, 117 per litre as of July 16, 2024.
Meanwhile, petrol pump prices across various filling stations have been adjusted again.
The National Bureau of Statistics price watch report showed that the average pump price of petrol increased to N750 per litre from the previous price of N545.83 per litre as of 2023. The report stated that Benue State had the highest petrol price at N864.55 per litre, followed by Jigawa and River States at N847 per litre and N810 per litre, respectively.
Dangote confirms petrol sales in August
In a chat with journalists recently, Dangote confirmed that petrol production had already begun.
The billionaire businessman also revealed that petrol sales to marketers would commence from August 2024. The refinery is expected to help reduce petrol prices from the current rate of over N700.
