IOCs selling crude at $4 per barrel above market price — Dangote
The Dangote Industries Limited (DIL) said local petrol prices will continue to increase as trading arms offer cargoes at $2-$4 per barrel above the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) official price. Vice President of Oil & Gas, Dangote Industries Limited, Mr DVG Edwin stated this while responding to a statement by the Chief Executive […]
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The Dangote Industries Limited (DIL) said local petrol prices will continue to increase as trading arms offer cargoes at $2-$4 per barrel above the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) official price.
Vice President of Oil & Gas, Dangote Industries Limited, Mr DVG Edwin stated this while responding to a statement by the Chief Executive Officer of NUPRC, Engr. Gbenga Komolafe, in an interview on ARISE News TV where he said: “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, in a statement Wednesday, insisted that International Oil Companies (IOCs) operating in Nigeria have consistently frustrated Dangote Refinery’s requests for locally produced crude as feedstock for its refining process.
Edwin said: “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.
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“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.
“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”, Edwin said and urged the regulatory commission to take a second look at the issue of pricing.
He commended the NUPRC for its various interventions in the oil company’s crude supply requests from International Oil Companies (IOCs), and for publishing the Domestic Crude Supply Obligation (DCSO) guidelines to enshrine transparency in the oil industry.
He however said: “If the Domestic Crude Supply Obligation (DCSO) guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the PIA.”
Edwin further noted that the NUPRC has been very supportive of the Dangote Refinery as they have intervened several times to help it secure crude supply.
However, he said “The NUPRC Chief Executive was probably misquoted by some people hence his statement that IOCs did not refuse to sell to us. To set the records straight, we would like to recap the facts that aside from Nigerian National Petroleum Corporation Limited (NNPCL), to date, we have only purchased crude directly from one other 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 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 would 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,” Edwin stated.