The supply of crude oil in Naira to the Dangote Refinery by the Nigerian National Oil Company is expected to continue for six months in the first phase, pending further consideration by the Technical Subcommittee on Domestic Sale of Crude Oil in Local Currency It is.
Sources at the commission and Dangote Refinery confirmed on Tuesday that the first phase of the Naira-to-crude trade will last for six months as crude oil is an international commodity and is priced in dollars.
Meanwhile, Bloomberg reported on Tuesday that the federal government plans to supply the Dangote refinery with up to 400,000 barrels of Nigerian crude oil per day.
According to the report, the development will take place over the next two months and is expected to take Nigeria’s crude oil supply to 24 million barrels from October to November 2024.
Also on Tuesday, oil market players declared that they were yet to receive any information from NNPC and Dangote Refinery regarding the alleged suspension of NNPC as the sole offtaker of petrol produced by the Lagos-based refinery. did.
On Tuesday, there were reports that NNPC is no longer the sole offloader of petrol from the Dangote refinery. NNPC and Dangote did not confirm this despite several attempts by our correspondent to respond on the issue.
As the alleged suspension of NNPC as the sole offloader of Dangote petrol made headlines in the oil sector on Tuesday, some warehouses have stopped selling the product in their tanks pending a possible rise in petrol prices.
However, this did not materialize as neither NNPC nor Dangote Refinery acknowledged the claim. The warehouse, which had previously suspended sales, eventually reopened several hours later.
Also on Tuesday, the Independent Petroleum Marketers Association of Nigeria disclosed that the NNPC portal used to purchase petrol was opened to IPMAN members by the national oil company.
This portal was previously closed to IPMAN members, who were stripped of access to product payments. But on Tuesday, independent marketers revealed the portal had been launched.
Naira vs. crude oil trading
Sources said the naira-oil deal would last for six months. They also said the product remains expected at the Dangote refinery.
“We know that many Nigerians are excited about the government’s agreement to trade Naira for crude oil, but most do not know that the deal will initially last six months,” he said. said an impeccable official. Dangote Refinery said it was speaking in confidence as it was not authorized to speak on the matter.
On Saturday, the Federal Government announced that it has started selling crude oil and other refined products in naira. The Federal Ministry of Finance disclosed this in a post on the handle X.
The statement read: “The Minister of Finance and the Coordinating Minister of Economic Affairs have announced that, in accordance with the directives of the Federal Executive Committee, the sale of crude oil and refined petroleum products in naira has officially commenced from October 1, 2024.”
“On October 3, 2024, following a meeting of the Implementation Committee chaired by the Minister of Finance to conduct a post-launch review of the Naira Crude Oil and Refined Products Marketing Plan, the launch of this strategic initiative was announced by key ministers. Confirmed by the official. ”
Last month, the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency, under the leadership of President Bola Tinubu, concluded that the Federal Executive Committee has decided on the sale of crude oil to local refineries in Naira and the concomitant purchase of petroleum products in Naira. announced that it had been approved. .
“From October 1, NNPC will begin supplying approximately 385 kbpd (385,000 barrels per day) of crude oil to the Dangote Refinery, to be paid for in naira,” the commission declared.
The government explained in September that the Naira to Crude Oil Initiative will help reduce pressure on the naira, eliminate unnecessary transaction costs and improve the availability of petroleum products across the country.
But officials said Tuesday that the deal won’t last forever.
“The contract is for six months in the initial stage. People should not think that it is forever. This is a dollar-based business so it is important to supply in naira, albeit at an equivalent dollar rate. The president should be commended for this.
“Otherwise, local crude oil would have been purchased from foreign-based traders who often mark up prices. And this impacts the cost of producing refined goods, whether in Nigeria or other countries. ” said a senior official at Dangote Refinery.
Members of the Committee on the Sale of Naira Crude Oil also corroborated this position, saying, “The transaction is for an initial period of six months and will be reviewed as and when the need arises.”
This comes after Bloomberg reported that the federal government plans to supply up to 400,000 barrels of Nigerian crude oil daily to the Dangote refinery.
Dangote’s increased reliance on local raw materials will significantly reduce Nigeria’s crude oil exports and disrupt Atlantic oil markets, according to cargo allocations reviewed by Bloomberg News.
The 650,000 barrel-per-day plant is larger than any in Africa or Europe and will require 13 to 14 shipments out of Nigeria’s typical monthly program of about 50 cargoes.
London-based FGE analyst Ronan Hodgson said the West African crude oil market was expected to “tighten significantly” in the fourth quarter due to supplies to Dangote.
He said this amount could even push Nigeria’s exports below 1 million barrels per day.
Some shipments for the next two months may not be delivered as scheduled, and the list for October already includes two shipments delayed from September.
Still, the planned volumes are significantly higher than the average 255,000 barrels per day of Nigerian crude oil taken by Dangote in the first half of this year, as the company gradually ramps up processing, according to data compiled by Bloomberg. .
Possibility of price increase
News of the alleged suspension of NNPC, the sole petrol offloader from the Dangote refinery, has raised concerns among warehouse owners as dealers suspended the sale of petrol for several hours in the belief that the price of the commodity would rise. Ta.
In response to an inquiry on whether NNPC has stepped down from its position as the sole offloader of Dangote Petrol, a leading oil market official said: As of now, virtually all warehouses in Apapa have no sales. It appears that DR (Dangote Refinery) has not yet offered a price. ”
But later in the evening, sources said the warehouse resumed selling the product following silence from NNPC and Dangote Refinery on the issue.
IPMAN also said it is awaiting notification from the Dangote refinery so that it can withdraw petrol from the refinery.
IPMAN Public Relations Director Chinedu Ukadike said the association was awaiting word from Dangote Refinery on when the independent distributor could start loading.
“As soon as we receive feedback from Dangote, the termination notice will commence and the notice will be accompanied by the price they will sell to us as independent marketers,” he said.
The marketer emphasized, “Although the removal of PMS from Dangote has not started yet, major marketers have started.”
IPMAN, which has the largest number of petrol stations in Nigeria, had earlier told Punch of its determination to purchase PMS directly from refineries without going through the NNPC.
Telmun James, Executive Director of IPMAN, told one of our correspondents that it is better to deal directly with fuel producers than to buy from competitors.
“NNPC is a marketer, they have their own way of doing things, IPMAN has its own way of doing things. IPMAN leadership strives to ensure that our members have the product, because if they have the product, the public can feel confident in purchasing the product. “Because it’s available,” he said.
The IPMAN leader further said: “They (Dangote officials) should deal with us. We are in the market with pride, we have stations and no one has the number of stations that we command. . If someone has something, you can’t deal with him directly? Some say he sells it, but where is the station? owns most of the gas stations.
When contacted, the Executive Director of the Nigeria Major Energy Markers Association declined to comment on whether its members had started collecting PMS directly from the Dangote refinery.
President of the Petroleum Retail Store Owners Association of Nigeria, Billy Gilly Harry, maintained that his members have not yet started collecting PMS from refineries.
Dangote refinery officials did not immediately respond to a query asking whether they had started selling gasoline directly to marketers.
NNPC Portal
IPMAN further confirmed that its members have started applying for the purchase of petrol through the functioning NNPC portal.
IPMAN said last week that the long-term closure of its portal has limited access to its products.
According to the NNPC spokesperson, Olufemi Soneye, the company shut down the portal due to a large backlog of orders.
Sony explained that the closure was necessary to prevent NNPC from holding on to the market operator’s capital for a long period of time.
“We have a significant backlog that must be addressed. The closure is intended to prevent marketers from holding on to their funds for an extended period of time,” Soneye explained.
However, in an exclusive interview with one of our correspondents on Monday, IPMAN Public Relations Secretary Ukadike said the national oil company had reactivated the portal to allow marketers access to the product.
He said, “We do not expect any increase in petrol prices as the NNPC has issued the standard price and it remains the same.” So, while we don’t expect an increase for now, we are still optimistic that more products will come as the portal is open and most members are accessing the products.
“Our marketers are currently processing the loading and some marketers have loaded the products. We are loading the consignments from Lagos, Port Harcourt and Warri. NNPC is distributing the products. There has been no rumblings or signs. Shipping has not stopped yet and we are optimistic that our products will reach all parts of the country by this week.”
On pricing, IPMAN officials said market players buy the product at a rate of 875 Naira at Port Harcourt depot, 877 Naira at Warri depot and much lower in Lagos State at a price of 870 Naira. He said he bought it.
