The management of Dangote Industries Limited (DIL) has refused to back down over claims that International Oil Companies (IOCs) are frustrating its quest to purchase crude feedstock for the Dangote refinery.
The operator of the 650, 000BPD refinery is insisting that IOCs are frustrating its quest to purchase crude oil due to over pricing.
This is coming on the heels of a statement by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) that no IOCs is frustrating the refinery.
The Chief Executive of the NUPRC Engr Gbenga Komolafe had countered Dangote’s claim by disclosing that IOCs are willing to sell to Dangote Refinery.
“No producer is refusing to make crude available to the Dangote refinery,” Komolafe had said.
READ ALSO: IOCs Are Not Refusing To Supply Dangote Refinery With Crude Oil—NUPRC
However, in a counter 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.
“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.
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“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”.
