Business
FG, global oil traders clash over Dangote Refinery’s products
-About 2 billion litres refined products trapped in storage tanks
The struggle among international oil traders and the Federal Government for supply of Dangote’s Refinery’s finished products is preventing the release of the over two billion litres of petroleum products already produced by the plant since it started production, multiple industry sources with knowledge of the matter informed Business Hallmark.
The refinery, the largest single-train facility in the world with a capacity of 650,000 barrels per day, began operations on January 12, 2024, after taking delivery of six million barrels of crude oil from the Nigerian National Petroleum Company Limited (NNPCL) and its trading partners.
Speaking on the landmark achievement, President of Dangote Group, owners of the refinery, Alhaji Aliko Dangote, said that the plant, which started with 350,000 barrels a day, would reach full capacity before the end of the year.
Dangote also promised Nigerians that the first sets of fuel from the plant will hit the market by the end of January.
In an effort to further ensure uninterrupted supply of its feedstocks, the refinery’s management purchased two cargoes of Western Texas Intermediate (WTI) crude grade from the United States of America.
The first shipment of two million barrels shipped by a very very large carrier (VVLC) Gem No. 1, chartered by Vitol, arrived at the refinery’s SPMs located 25 kilometres from the Lekki shore in early March, while the second crude shipment on an Otis vessel, which loaded in Houston on March 1, arrived the country on March 13, according to Kpler and LSEG ship tracking.
With the six million barrels bought locally and the three million barrels purchased in the U.S, the Dangote Refinery had so far received nine million barrels of crude oil in total.
Not factoring in the last cargo of one million barrels, which just arrived the country last Wednesday, the Dangote Refinery, it was learnt, had refined at least eight million barrels of crude oil with a yield of over 2.5billion litres of refined petroleum products.
According to BH checks, one barrel of crude oil contains 159 litres of PMS, excluding other products like diesel, kerosene and aviation fuel.
In essence, the already refined eight million barrels of crude oil by Dangote refinery is projected to have yielded 1.272billion to 1.4 billion litres of PMS at the average rate of 159 litres per barrel. Other refined products like Jet A1, diesel and kerosene are expected to push up the number to the 2 billion litres mark
However, one and half months after the January 31 timeline set by the management of the refinery to begin sale of its petroleum product in the Nigerian market, not a single litre of fuel has hit the market.
Some major and independent oil marketers, who spoke to BH at the weekend lamented that they have not received a single drop of diesel and aviation fuel from the refinery as promised by its management.
According to the marketers, they are still waiting when they will be called to start lifting refined products from the refinery.
“I don’t know of any marketer that has been supplied AGO or Jet A1, not to talk of PMS. We are still waiting patiently for Dangote to open its doors to our tankers”, a member of the Independent Petroleum Marketers Association (IPMAN) in Lagos, who did not want to be identified told our correspondent.
Meanwhile, BH reliably gathered that the delay was caused by several factors, especially the inability of the refinery to meet the stiff regulatory requirements by supervising regulatory agencies, as well as the disagreement between the Federal Government and the refinery’s management on the appropriate pricing of the products in the country.
Several sources at both Dangote Group and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the regulator of Nigeria’s midstream and downstream oil sector, blamed the delay in the release of refined products into the market on the failure to get the much needed pass mark from NMDPRA.
“All other grey areas have been sorted out. The only knotty issue, as far as I know, is that of pricing. That is the amount Dangote will sell his products locally.
“International oil traders are offering Dangote more than what the nation (government) is offering him for his products.
“While BP, Trafigura, Vitol and other big oil traders are ready to buy at a premium, even offering to pay upfront for future fuel cargoes and making available huge loans to Dangote for it to purchase feedstocks, local authorities want Dangote to sell at a discount.
“I think the prolonged approval process is meant to arm twist Dangote to sell his fuel at a controlled rate. If not that there is something to it, how long does it take to complete a normal regulatory process?
“I can assure you that if the disagreement on pricing is sorted out today, Dangote’s fuel will enter the market today”, another reliable source informed BH.
While the Federal Government had largely failed to fulfil its agreement to supply crude and working capital to Dangote in exchange for 20 percent equity in his refinery, foreign oil traders, in contrast, have offered loans to provide capital for Dangote in exchange for fuel from his refinery.
According to reliable sources, Dangote had held unsuccessful meetings with state-owned firm, NNPCL, for the prompt payment of the balance of its equity in the refinery to enable him purchase crude.
Meanwhile, leading commodities trading firms like BP, Trafigura and Vitol, it was learnt, have held several meetings with Dangote in Lagos and London, where they offered loans for his refinery’s estimated $3 billion working capital needed to buy crude oil.
Besides offering to provide Dangote the funding for his crude oil needs, industry sources said traders had made huge down payments for future fuel cargoes.
For instance, while Vitol has already prepaid for some product cargoes to assist the refiner in purchasing crude, Trafigura has swapped some crude oil for future fuel cargoes.
Despite the arm-wisting and overtures from both the government and traders, Dangote is bent on setting up his own oil trading arm to help run crude and products supply for his new plant.
Already, top traders have been recruited for the trading firm based in London. The trading firm will be managed by a former Essar trader, Radha Mohan. He will be assisted by two new traders to be headhunted from top commodities trading companies.
Sources close to the Kano-born billionaire claimed he is not too disposed to signing a deal with the international trading firms because he fears their involvement will lower his control of the business and profit.
If the move succeeds, experts argued it would reduce the role and influence of the trading firms in oil business.
“The giant 650,000 barrel-per-day refinery is set to redraw global oil and fuel flows and the trading community is closely watching the way it will operate. He (Dangote) is going to try and do it himself”, an industry source declared.
Efforts to get the reaction of Dangote Group proved unsuccessful as the company’s Corporate Communications Manager, Anthony Chiejina, did not reply to BH’s requests for comment.
·
