Dangote Refinery Receives Four Cargoes Of Crude Oil Under Naira-For-Crude Agreement

The Dangote Petroleum Refinery has taken delivery of four crude oil cargoes from the Nigerian National Petroleum Company Limited (NNPCL) under the new naira-for-crude sale agreement.

Officials from the refinery and the Federal Government confirmed on Tuesday that these deliveries took place over the past three weeks.

The crude supply marks the commencement of the Federal Government’s initiative to sell crude to local refineries in exchange for local currency. Sources familiar with the deal indicated that more cargoes are expected to arrive soon.

The Dangote Refinery, with a capacity of 650,000 barrels per day, is the first beneficiary of this arrangement and is preparing to sell refined petroleum products, including Premium Motor Spirit (PMS), directly to domestic dealers.

A source from the Technical Subcommittee on Domestic Sale of Crude Oil, who spoke on condition of anonymity, confirmed that further shipments would be delivered in the coming weeks, signaling the refinery’s role in Nigeria’s local petroleum market.

“The naira-for-crude deal has started, and we have received four cargoes so far,” the source stated. The first phase of the agreement will last six months, subject to renewal by the government.

The move comes as the refinery overcomes early challenges, including allegations from Dangote Group that international oil companies (IOCs) attempted to sabotage the project by refusing to supply crude. The IOCs had reportedly insisted on using foreign agents for crude sales, leading to inflated prices above market rates.

Despite intervention from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the group expressed concerns about the continued obstruction of crude supplies.

In response to these challenges, President Bola Tinubu’s administration proposed the sale of crude to local refineries in naira, a policy adopted by the Federal Executive Council. The government approved 450,000 barrels per day for local consumption, with the Dangote Refinery serving as a pilot for this initiative.

This development is expected to ease Nigeria’s dependence on fuel imports, which had created significant supply gaps. The refinery is now positioned to produce diesel, PMS, and aviation fuel for local consumption, which could potentially stabilize prices in the domestic market.

According to Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, the crude deliveries to Dangote will address the supply shortages that have plagued the NNPC and other marketers in recent months.

While domestic production is ramping up, analysts predict that global gasoline supply chains may face disruptions as Nigeria’s refining capacity reduces its reliance on imports. S&P Global Commodity Insights reported a sharp drop in petrol shipments to Nigeria in October, indicating the early effects of the Dangote refinery’s operations.

The refinery has supplied 317 million litres of PMS between September and mid-October and is expected to reach its target of producing 30 million litres per day in the coming months. The full impact of this increased domestic refining capacity on global oil markets is expected to be felt by early 2025.

Despite these positive developments, concerns remain among oil producers in Nigeria. The Independent Petroleum Producers Group (IPPG) has raised objections to being compelled to sell crude to local refineries, arguing that such an arrangement conflicts with the Petroleum Industry Act’s willing-buyer, willing-seller framework.

The group has called on NNPC to utilize its statutory crude allocation to address the supply shortfall, while also advocating for the protection of existing commercial agreements in the sector.

As Nigeria navigates the complexities of local crude supply and refining, the success of the naira-for-crude initiative will be critical in shaping the country’s energy future and reducing its reliance on imported fuel.