Dangote Industries Limited (DIL) has expressed appreciation for the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its efforts in facilitating the company’s crude supply requests from International Oil Companies (IOCs). The commendation also extended to NUPRC’s publication of the Domestic Crude Supply Obligation (DCSO) guidelines, which aim to promote transparency in the oil industry.
Mr. DVG Edwin, Vice President of Oil & Gas at Dangote Industries Limited, remarked, “If the DCSO guidelines are diligently implemented, it will ensure that we deal directly with the crude oil producers in Nigeria as outlined by the Petroleum Industry Act (PIA).”
Edwin highlighted that IOCs operating in Nigeria have repeatedly obstructed the company’s attempts to procure locally produced crude for its refining operations. He noted that when cargoes are offered by trading arms, the price is often marked up by $2-$4 per barrel above the official price set by NUPRC.
“For example, in April, we paid $96.23 per barrel for a cargo of Bonga crude grade, excluding transport costs. This price included $90.15 for dated Brent, a $5.08 premium from NNPC (NSP), and an additional $1 trader premium. Conversely, we were able to purchase WTI crude at a dated Brent price of $90.15 with only a $0.93 trader premium, including transport costs. When NNPC reduced its premium based on market feedback, some traders demanded a premium of up to $4 million above the NSP for a cargo of Bonny Light,” Edwin explained. “Data from platforms like Platts and Argus shows that the prices offered to us are significantly higher than market prices tracked by these platforms. We had to escalate this issue to NUPRC, asking them to reconsider the crude pricing.”
Edwin’s comments followed a statement by NUPRC Chief Executive Officer, Gbenga Komolafe, who mentioned in an interview with ARISE News TV that it is incorrect to claim IOCs are refusing to supply crude to domestic refiners, as the PIA stipulates a willing buyer-willing seller relationship.
Edwin acknowledged the support from NUPRC in securing crude supplies for the Dangote Refinery but clarified that the IOCs have indeed been reluctant to sell directly to them. “Aside from the Nigerian National Petroleum Corporation Limited (NNPCL), we have only purchased crude directly from one other local producer, Sapetro. All other producers direct us to their international trading arms, which act as non-value-adding middlemen, earning margins without being bound by Nigerian laws or paying taxes in Nigeria.”
He further described an instance where an IOC’s trading arm refused to sell directly to Dangote Industries and suggested using a middleman, which led to a nine-month negotiation before NUPRC intervened to resolve the situation.
“When we attempted to purchase our crude requirements for August, the international trading arms informed us that they had committed their Nigerian cargoes to a Pertamina (the Indonesian National Oil Company) tender. We had to wait for the tender to conclude before seeing what was available,” Edwin recounted. “This is not an isolated case. Often, the crude grades we wish to buy are sold to Indian or other Asian refiners before the cargoes are formally allocated in the curtailment meeting chaired by NUPRC.”
Edwin urged NUPRC to reassess the pricing issue. “While NUPRC has asserted that transactions should be on a willing seller/willing buyer basis, market liquidity is essential for this to work. In cases where a refinery needs a specific crude grade at a specific time, there is typically only one participant on either side of the market.”
He emphasized that the domestic gas supply obligation specifies volume obligations per producer and a transparent pricing formula to avoid price gouging in an illiquid market. “Although the domestic crude supply obligation defined in the PIA has gaps, it should not prevent wise decision-making,” Edwin concluded.
