Business
FG lauds Dangote Refinery for achieving fuel supply feat
... refinery refutes NNPCL alleged selling price of N898 per liter
The Federal Government has praised the Dangote Refinery and the group for the start of lifting of products, particularly premium motor spirit, PMS, for the local market. For months since the completion of the refinery, there had been a back and forth over the issues and modalities for production and supply of products to domestic market.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who led the government delegation, described the event as epoch-making and a renewal of Nigerians’ hope in industrialisation and local refining yesterday.
The minister, who was accompanied by Dr. Zacch Adedeji, Executive Chairman of the Federal Inland Revenue Service and Chairman of the Technical Sub-Committee on naira-based crude sales to local refineries, also stated that the initiative will ensure energy self-sufficiency and security in Nigeria. He explained that the availability of the product to Nigerians will end perennial scarcity and long queues.
“Today, you have taken an important step towards energy self-sufficiency in Nigeria. We have advanced toward energy security and the implementation of the government’s policy of boosting domestic investment. It is President Tinubu’s vision that no raw material should leave Nigeria’s shores without some form of value being added. Commendation is due to His Excellency, Bola Ahmed Tinubu, who facilitated the supply of crude to local refineries in naira by ensuring that NNPC provides crude to these refineries,” he added.
Edun lauded the President of Dangote Industries Limited, Aliko Dangote, and his team for restoring Nigeria’s status as a producer of refined products, nearly three decades after the country ceased local refining. He praised Dangote for his patriotism and for exemplifying the can-do spirit of Nigeria, despite skepticism from many quarters about the feasibility of establishing a refinery.
“We congratulate Dangote, Africa’s foremost businessman and industrialist, and arguably one of the top investors in the world, on this day of triumph and success. They said it couldn’t be done, that we could not produce PMS from this facility, but today we are all witnesses to the commencement of PMS loading here.
“This refinery is producing PMS that is sufficient for the entire Nigerian market, with a surplus for export. We call on other domestic refiners to not only supply the local market but also to change the narrative by producing petroleum products for the sub-region and beyond.
“This will generate additional foreign exchange revenue for the betterment of the economy. We are thrilled that this day has arrived,” he said.
Vice President of Oil and Gas at Dangote Industries Limited (DIL), Devakumar Edwin, stated that the commencement of PMS production from the refinery fulfills Dangote’s vision of addressing energy supply challenges in Nigeria.
“If you consider the refinery’s capacity for PMS alone, processing 52,000 barrels of crude each day generates more than 54 million litres of PMS. Additionally, the refinery can produce other products. Specifically, 44% of the refinery’s capacity can meet 100% of domestic needs, while 56% is allocated for export. It is indeed a massive refinery,” he said.
“It will not only substitute imports but also boost forex generation through export. We will save foreign exchange in two ways: first, by reducing expenditures on importing petrol, jet fuel, diesel, and other products, and second, through the revenue generated from exports,” he said.
However, a disagreement arose Sunday night between the NNPCL and Dangote Refinery over the actual price fuel is being lifted from the refinery. NNPCL’S spokesman, Mr. Olufemi Soneye, had alleged that the refinery was selling at the price of N898 per liter, which is the reason the corporation is the only one lifting in order to ensure that price remains at the present level.
But in a swift reaction, the refinery refutes the allegation, insisting that “the statement was misleading and mischievous, and deliberately aimed at undermining the milestone achieved today (yesterday),” Mr. Anthony Chiejina said, adding that only the presidential committee which will commence deliberations on October 1, has the authority to determine the price.
Yesterday development, which marks local fuel supply, comes about fourteen years after the nation’s four moribund refineries, Port Harcourt 1 and 2, Warri, and Kaduna stopped fuel production.At about 3.12 pm on Sunday, 10 trucks belonging to the Nigerian National Petroleum Corporation Limited (NNPCL) drove into the Dangote Refinery gantries, and their compartments were filled with petrol from a computerized gadget.
Subsequently, 86 trucks were called in time to load their products and later led out of the gantries to begin their home journey.
“First set of trucks set for loading of PMS at the Dangote Petroleum Refinery”, Dangote Refinery tweeted on its verified X handle.
“NNPC begins PMS lifting at the Dangote Petroleum Refinery”, another tweet read.
The loading of the Dangote petrol signifies an end to the long debate over the quality and sale of the product. The $20 billion Lekki-based facility has 86 gantries, allowing it to load 86 trucks simultaneously.
NNPCL had in a tweet on Saturday, announced to an expectant nation that hundreds of trucks would be deployed to the refinery today (Sunday) for PMS loading.
“In preparation for the Dangote Refinery’s scheduled petrol loading on Sunday, September 15, 2024, NNPC Ltd has been mobilising trucks to the refinery’s fuel loading gantry in Ibeju-Lekki.
As of Saturday afternoon, NNPC Ltd had deployed over 100 trucks, with hundreds more en route, the national oil corporation stated.
The four government-owned refineries, which can process about 445,000 barrels of crude per day, have been idle for years.
Despite successive administrations spending billions of dollars on their maintenance, the refineries failed to live up to expectations.
At their best in 2010, the four refineries combined were able to operate at 30 percent production capacity, wasting a large chunk of the 445,000 barrels they received daily.
For instance, two of the refineries, Kaduna and Warri, made a paltry revenue of N6.706 billion between 2017 and 2019, but incurred losses totaling N631.907 billion.
According to the financial statements of the two refineries released by the NNPC, salaries for unproductive workers accounted for N43.25 billion, while maintenance of the Kaduna refinery cost N1.6887 trillion.
Owing to the inability of the four public-owned refineries to refine petroleum products, the country was forced to rely on petrol imports to meet its needs, estimated at 50 to 60 million liters.
The four refineries were finally shut down by the NNPC in 2020 for functioning below capacity.
Speaking on the shutdown of the moribund refineries in September 2020, the Group Managing Director of NNPCL, Mele Kyari, said it became necessary to stop them from operating altogether having ascertained that they were underperforming.
“All the four refineries in three locations are shut down and it was a deliberate decision for two reasons.
“One is that the delivery of crude oil to these refineries is completely challenged because the pipeline network has been completely compromised by vandals and all kinds of people, who will not allow us to operate these pipelines.
“That means you are not able to deliver crude oil to these refineries effectively to their maximum capacity.
“Secondly, what you call rehabilitation is different from turnaround maintenance. Turnaround is routine, which every refinery does.
“But when you talk about rehabilitation, it is that colossal loss of capacity in the refinery and it means you haven’t done the turnaround maintenance properly”, Kyari said back in 2020.
Meanwhile, the Federal Government had in the last three years expended billions of dollars on the repairs of the four refineries, which are still ongoing repairs.
In 2021, the Federal Executive Council (FEC) approved the sum of $1.5 billion for the rehabilitation and revamp of the Port Harcourt Refinery.
Also, on August 6, 2022, FEC approved the award of contracts for the rehabilitation of Warri and Kaduna refineries to the Italian company, Saipem, for US$ 1.5 billion.
Before then, from 2010 to 2020 to be precise, a total sum of N11.35 trillion was released by different administrations for the rehabilitation of the four refineries, but the funds went down the drains.
While speaking on the efforts to revive the four government-owned refineries, an oil industry expert, Faith Nwadishi, doubted they would ever operate again.
“I am just keeping my fingers crossed and trying to be very optimistic about this, because it will go a long way in reducing the hardship and perhaps also reduce the pump price of petrol.
“But being somebody who’s been in the sector for long, I am a bit skeptical the refineries are going to work”, Nwadishi noted.
Meanwhile, Business Hallmark gathered on Sunday that NNPCL will for now be the sole buyer of petrol from the Dangote refinery, as the government intends to keep the pump price of petrol at its current subsidised rates of between N855 and N897.
According to sources in the government and the Major Energies Marketers Association of Nigeria (MEMAN), while Nigerians will continue to buy fuel at the official pump price of N855 in Lagos and N897 outside the state, the actual price of the product from Dangote Refinery is N898.
“NNPC Trading Limited will continue to intervene for two reasons. One, Dangote, for now, can only supply 25 million liters of petrol per day out of the estimated 40-50 million litres daily national need.
“As the refinery ramp up production, the shortfall of 15 million to 20 million will be met. But there is a dilemma of who to sell the cheaper Dangote petrol and the more expensive imported fuel to.
“So, the government has agreed to absorb the difference so that pump prices of petrol can be uniform until the time when all our petrol needs are met locally.
“Also, Dangote Refinery is selling to us at N898 per litre. What this means is that there is an under-recovery (subsidy) of N43 still borne by the government.
“If the government allows marketers to lift from Dangote as clamoured for by many, most Nigerians, except Lagos residents and Ogun, will pay around N1,000 or more for a litre of PMS as marketers will have to add their transportation costs and other margins”, declared a source in the Federal Ministry of Petroleum Resources, who did not want his identity revealed.
Speaking to BH on the development, NNPC’s spokesperson, Olufemi Soneye, confirmed that the corporation bought petrol from the Dangote refinery at N898 per litre.
“The claim that we purchased it at N760 per litre is incorrect. For this initial loading, the price is N898 per liter”, he said.
