The Dangote Petroleum Refinery is currently importing crude oil and expects its first crude cargo in two weeks’ time, the Executive Director, Dangote Group, Devakumar Edwin, has revealed.
Although the Nigerian National Petroleum Company Limited trades crude oil on behalf of Nigeria, Edwin in an interview with S&P Global Commodity Insights on Monday, said the NNPCL had committed its crude to other entities.
The Dangote refinery boss did not disclose the other entities receiving the oil company’s crude but NNPC disclosed last month it had entered into a $3bn crude oil-for-loan deal with African Export-Import Bank. The deal allowed the company to pledge future oil production to the bank as repayments for the loan.
Also, NNPC sources told the newsmen on Tuesday the company had entered into crude oil contracts with a number of entities, a development that made it impossible for the organisation to meet Dangote’s need earlier.
A top official of the oil company, however, said plans were already underway to ensure Dangote’s refineries crude oil needs were met in November.
Also, Edwin pointed out that the importation of crude by Dangote refinery was temporary, as the firm would receive supply from NNPCL from November.
Edwin went ahead to state that the firm would begin the production of up to 370,000 barrels per day of crude that would give rise to Automotive Gas Oil, popularly called diesel, and jet fuel in October 2023.
For Premium Motor Spirit, popularly called petrol, the Dangote Group’s boss said the plant would produce it by November 30, 2023.
This came as oil marketers stated that the prices of diesel and jet fuel would only crash when the Dangote refinery starts receiving crude oil from Nigeria, and not by importing crude.
Meanwhile, Edwin stated in the interview that the Dangote Refinery would initiate a gradual increase in petrol production, aiming to reach an impressive 650,000 barrels per day by November 30.
He emphasised the refinery’s readiness to receive crude oil, stating, “Right now, I’m ready to receive crude. We are just waiting for the first vessel. And so, as soon as it comes in, we can start.”
Regarding the shift in the original timeline, Edwin clarified, during his conversation with S&P, that the NNPCL had already committed their crude oil to another entity on a forward basis, causing a temporary delay.
He said the setback was momentary, and the refinery would soon run exclusively on Nigerian crude oil as from November 2023.
It was also gathered on Tuesday in Abuja that the NNPCL had entered into crude oil supply commitments with other entities, but would ensure that it supplies the commodity to Dangote refinery in November.
In mid-August, the national oil firm announced that it had secured a $3bn emergency crude oil repayment loan from the African Export-Import Bank.
It had announced the acquisition of the loan in a brief statement titled, ‘Relief for the naira: NNPC Ltd secures $3bn emergency crude repayment loan from AFREXIM Bank.’
The statement read,
“The NNPC Ltd and @afreximbank have jointly signed a commitment letter and term-sheet for an emergency $3bn crude oil repayment loan.
“The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.”
Providing further explanation about the loan at the time, the Senior Special Assistant to President on Digital/New Media, O’tega Ogra, in several posts on X (formerly Twitter), explained that the $3bn was not a crude-for-refined products swap loan, but an upfront cash loan against proceeds from a limited amount of future crude oil production.
This confirmed that the national oil firm had really made commitments to other entities using the crude produced by Nigeria.
Ogra had said,
“Is this loan risky for NNPCL or the Nigerian Treasury? No. The exposure for NNPCL is very limited, covering just a fraction of their entitlements. Additionally, there are no sovereign guarantees tied to this loan.”
“How will the loan be repaid? The loan will be repaid against a fraction of proceeds from future crude oil production. It’s a strategic move that ensures a balance between our current economic needs and future production capabilities.
“What is the difference between this and previous swap deals? This is not a crude for refined products agreement where the government does not earn any proceeds from the swap.”
Meanwhile, during the latest S&P interview, Edwin said the Nigerian oil would be purchased in US dollars, and not naira because the refinery is located in a free trade zone on the outskirts of Lagos.
He said the NNPCL would, however, supply some crude at knockdown prices due to its equity stake in the refinery
Edwin further stated that, aside from heavy Angolan grades, the Dangote refinery could process most African crude grades, as well as Middle Eastern Arab Light and even US light-tight oil.
He said,
“We can take even some of the Russian grades… if the global system opens up to allow us to receive them. Basically, if you look at our production profile, 50 per cent of my production will meet 100 per cent of the requirements of the country.
“Excess gasoline – which will be 10 ppm sulfur Euro 5 quality — will be exported to other African markets as well as the US and South America, although the volumes will be relatively small. Meanwhile, jet fuel will be exported to Europe and diesel will be sold in sub-Saharan Africa.”
S&P also quoted Edwin as saying the refinery would be “enormously beneficial to the country” by establishing a reliable supply of “environmentally-friendly” refined products and bringing “a huge amount of foreign exchange into the country.”
Edwin also noted that the refinery would play a pivotal role in alleviating the fuel supply challenges faced by import-dependent West Africa, worsened by Nigeria’s recent removal of fuel subsidies, which had led to a thriving illicit gasoline market due to price fluctuations.
He added that the revenues generated from the refinery’s operations would be reinvested to fuel further developments, underscoring Aliko Dangote’s commitment to Nigeria.
“The money will be coming back in, and it will go for further investments. Aliko Dangote is from Nigeria and his focus is always on Nigeria,” Edwin stated.
