Oil producers, beneath the aegis of the Independent Petroleum Producers Group, have warned towards being pressured to promote crude oil to the Dangote Petroleum Refinery and different native ones in Nigeria.
The IPPG produces about 30 per cent of Nigeria’s crude oil, in line with the Nigerian Upstream Petroleum Regulatory Commission.
The newest crude oil manufacturing knowledge from NUPRC confirmed that Nigeria’s complete manufacturing (each crude and condensates) was 1,533,698 barrels in July. When 30 per cent of this determine is calculated, the IPPG must be producing about 460,000bpd of crude.
The IPPG additionally referred to as on the Nigerian National Petroleum Company Limited to re-direct its allotted crude oil volumes to Dangote refinery and different native refineries to mitigate the present crude provide scarcity being skilled by the native refiners that’s impacting native product availability in lots of elements of Nigeria.
The Chairman of IPPG, Abdulrazak Isa, in a letter dated August 16, 2024, and addressed to the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, stated NNPC ought to utilise its allotted 445,000 barrels per day intervention crude oil quantity to salvage the present scenario because it did in lots of situations up to now.
Isa stated some IPPG members already owned and/or had been supplying crude oil to native refineries.
He insisted that NNPC was in an excellent place to mitigate the present crude provide shortfall confronted by native refiners by leveraging its statutory crude allocation to fulfill native home consumption.
“Historically, NNPC has at all times had an intervention crude oil quantity (445,000bpd) meant to fulfill the nation’s home consumption. This quantity has at all times been used beneath varied swap mechanisms to import refined merchandise for home consumption.
“Since there may be now home refining capability to fulfill consumption, this devoted quantity must be reserved for all home refineries beneath a value hedge mechanism that may be offered by an appropriate monetary establishment equivalent to Afrexim Bank,’’ he said.
Isa, nevertheless, maintained that “Any nationwide manufacturing above this allotted quantity must be handled strictly as export volumes, adhering to the willing-buyer, willing-seller framework of the worldwide market particularly because the refiners might want to export extra merchandise that surpass home demand, thus boosting FX (international change) earnings.’’
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The group expressed considerations over sure current developments, together with the home crude oil refining necessities and crude oil manufacturing forecast for the second half of 2024, introduced by NUPRC, in addition to the request to all producing firms for his or her month-to-month quotations for crude oil provide to licensed refineries in Nigeria.
Specifically, IPPG stated a few of its members had obtained letters from the Dangote Refinery for crude provide nominations for October, and faulted the method as bringing them beneath an obligation, saying it conflicted with the spirit of the willing-buyer, willing-seller framework prescribed by the Petroleum Industry Act 2021.
He asserted that the target of enhancing the nation’s petroleum worth chain must be finished throughout the confines of the regulation and present obligations.
He expressed confidence that an amicable answer could possibly be reached by all stakeholders with out jeopardising the prevailing industrial agreements, financial pursuits, and enterprise fashions of every section of the oil and fuel sector.
“While we totally assist and commend the efforts of Nigerian entrepreneurs to reinforce home refining capability, it is vital that no personal sector enterprise is unduly pressured into preparations which will successfully subsidise one other throughout the oil and fuel worth chain beneath any guise by any means.
“Under this willing-buyer, willing-seller framework, it’s important for refiners to barter and execute long-term crude oil Sales and Purchase Agreements with producers and their advertising and marketing brokers. These agreements ought to comply with trade finest practices, with typical tenures starting from one to 5 years,’’ the IPPG chairman stated.
He added that a few of them had additionally obtained allocation letters from NUPRC for the availability of particular volumes of crude oil to the home marketplace for the second half of 2024, expressing considerations about its potential implications for the financial system, particularly the international change earnings via royalties and taxes.
The group famous, “We perceive that the present allocation methodology seems to be based mostly on a matrix of manufacturing forecasts by producers, issued technical allowable charges in addition to crude oil necessities of home refineries, relatively than precise native consumption wants. This raises vital considerations because it means that allocations are being decided based mostly on the calls for of refiners, which can exceed what is required for home consumption.
“Such an method might result in inefficiencies and unfairly drawback producers. Therefore, refineries with extra capability past native consumption mustn’t exploit the Domestic Crude Oil Supply Obligations to the detriment of oil producers and different stakeholders, together with the Government.’’
Isa referred to as for transparency in how the allocations to grease producers had been decided and requested NUPRC to offer clear particulars on the allocation standards and methodology, whereas he sought a possibility for IPPG to make enter into the manufacturing forecast to make sure it precisely displays operational realities.
The NUPRC didn’t reply to enquiries when contacted to react to the place of the indigenous crude oil producers.
The PUNCH remembers that Dangote and different native refineries have repeatedly accused worldwide oil firms of not promoting crude to them.
President Bola Tinubu later directed the NNPC to promote feedstock to the native refineries in naira
On Monday, the Federal Government introduced that the deal would start in October.
The Publicity Secretary of the Crude Oil Refiners Association of Nigeria, Eche Idoko, instructed our correspondent final week {that a} assembly was held to that impact.
Modular refiner fear
Meanwhile, the crude provide disaster in Nigeria took a brand new twist on Tuesday because the house owners of modular refineries warned the Federal Government towards ignoring them whereas promoting crude oil to the Dangote refinery.
This is coming following an announcement by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, on Monday that crude gross sales to the Dangote refinery would begin in October.
Edun had presided over a vital assembly of the Implementation Committee on Crude Oil Sales in Naira.
The Executive Chairman of the Federal Inland Revenue Service, Zacch Adedeji, who can be the Chairman of the Technical Sub-Committee, reported that the primary PMS supply from Dangote is predicted in September beneath present agreements.
However, the Publicity Secretary CORAN, Idoko, expressed considerations that the Federal Government had sidelined modular refineries within the preparations.
Though he recommended the Federal Government for the choice to promote crude to the 650,000 Dangote refinery in naira, he instructed The PUNCH in an interview that Dangote was not the one refinery in Nigeria.
“The choice of the Federal Government to begin promoting crude to Dangote in October is welcomed, however I fear that the federal government has exercised worry of Dangote changing into a monopoly, and now it has at all times created a situation for the emergence of a monopoly.
“We have over time reiterated that now we have greater than only one refinery in Nigeria. Dangote just isn’t the one refinery, albeit the largest, largest, however then, there are different smaller refineries, and we thought that no matter good gesture is prolonged to Dangote must be prolonged to all.
“We have made this clear in most of our communications, but I think the Federal Government is still making the same mistake,” Idoko harassed.