Oil producers, under the auspices of Independent Petroleum Producers Group (IPPG) have said they will not be compelled by the federal government to sell crude oil to the Dangote Refinery and other local ones in Nigeria.
The IPPG said rather than try to force it, the Nigerian National Petroleum Company Limited (NNPCL) should redirect its allocated 445,000 barrels per day intervention crude oil volumes to Dangote Refinery and other local refineries to mitigate the current crude supply shortage being experienced by the local refiners that is impacting local product availability in many parts of Nigeria.
Chairman of IPPG, Abdulrazak Isa, in a letter dated August 16, 2024, and addressed to the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe.
According to Isa, some IPPG members already owned and or were supplying crude oil to local refineries but insisted that the NNPC was in a good position to mitigate the current crude supply shortfall.
“Historically, NNPC has always had an intervention crude oil volume (445kbopd) meant to satisfy the nation’s domestic consumption. This volume has always been used, under various swap mechanisms, to import refined products for domestic consumption.
“Since there is now domestic refining capacity to meet consumption, this dedicated volume should be reserved for all domestic refineries under a price hedge mechanism that can be provided by a suitable financial institution such as Afrexim Bank,’’ he stated.
Isa, however, maintained that, “Any national production above this allocated volume should be treated strictly as export volumes, adhering to the willing buyer, willing seller framework of the international market especially since the refiners will need to export excess products that surpass domestic demand thus boosting FX earnings.’’
The group expressed concerns over certain recent developments including the domestic crude oil refining requirements and crude oil production forecast for the second half of 2024, announced by NUPRC, as well as the request to all producing companies for their monthly quotations for crude oil supply to licensed refineries in Nigeria.
Specifically, IPPG said some of its members had received letters from the Dangote Refinery for crude supply nominations for October, and faulted the approach as bringing them under 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 objective of enhancing the country’s petroleum value chain should be done within the confines of the law and existing obligations, expressing the confidence that an amicable solution could be reached by all stakeholders without jeopardising the existing commercial agreements, economic interests and business models of each segment of the oil and gas sector.
Isa called for transparency in how the allocations to oil producers were determined and requested NUPRC to provide clear details on the allocation criteria and methodology, while he sought an opportunity for IPPG to make input into the production forecast to ensure it accurately reflects operational realities.
