Victor Ezeja
Admin
Nigeria’s failure to make crude oil available to the multi-billion dollar Dangote Refinery has been identified as reason for the delayed production of refined petroleum products at the facility. This came to the fore as the 650,000 barrels per day Dangote Refinery is now requesting feedstock guarantee from Nigerian authorities in readiness to finally commence operations.
Prime Business Africa reports that the gigantic petrochemical facility was upon inauguration billed to begin refining of crude oil in August but couldn’t achieve this. It has now also missed the October production target, thereby shattering the hopes of Africa, especially Nigeria, of a possible end to petrol importation.
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Meanwhile, equally affected are five modular refineries that are ready to commence the production of refined petroleum products but cannot produce the commodities due to the unavailability of crude oil. Apart from Dangote Refinery, NNPCL refineries and others, like BUA and Crude Oil Refinery Owners Association (CORAN) had earlier disclosed that the combined capacity of modular refineries in the country stands at 27,000 barrels per day.
Operators of refineries in the country, particularly the modular ones, have now spoken up on how crude oil supply shortage hampers their businesses, a situation which is projected to affect conventional refineries coming up in the country. They spoke out on Wednesday when they gathered at the office of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in Abuja.
While expressing worry over the logistics side of supply and safety of their data with NUPRC, the crude oil producers stated that refiners would need to convince them that the off taker has dollars to pay for crude oil sustainably. This was even as the price of crude oil (Brent) edged slightly higher to sell for almost $87 per barrel at about 4pm Wednesday, gaining about 2.20 per cent increase.
The oil companies also raised issues on the currency of transaction, the differences in the kind of crude that certain refineries can process and issues surrounding making information on contracts with refiners available to the NUPRC since they have a non-disclosure clause in the contracts.
Speaking earlier, the Chief Executive Officer of NUPRC, Gbenga Komolafe, said the meeting was “convened, at least for us to collectively put heads together to address the feedstock of our domestic refineries so that at the end of the day, the objective is for us to take the nation to a level where our nation is a net exporter of refined products as against net exporter of crude, without value addition.”
He harped on the need to make sure local refineries are working, stressing that the move will enable the government to strengthen the economy and the Naira. This was as he maintained that a company that fails to comply with its domestic supply obligation will not be granted export permit for crude oil for the lease area.
Komolafe added that the meeting was to sensitise the attendees on the need to begin the application of the law as it relates to the domestic supply obligation to Nigerian refineries. According to him, operators have an obligation to act in accordance with national interest or risk a fine of $10,000; a penalty of 50 per cent of their fiscal price per barrel of crude oil not delivered to refineries; and denial of export permits.
Section 109 of the Petroleum Industry Act (PIA) had introduced Domestic Crude Supply Obligation (DCSO) to Nigeria’s oil industry to ensure domestic refineries are not starved of crude oil supply. But operators, who produce only diesel and aviation fuel, have consistently decried shortage.
The NUPRC chief executive however assured that: “pre-emptive steps are being taken because it would send wrong and unbecoming signals to the international business community if operators of domestic refineries in one of the world’s largest crude oil-producing countries start importing feedstock for their production.”
