Business
Fuel deal with Dangote Refinery pushes MRS to market leadership
The fuel supply and distribution deal between the 650,000 barrels per day Dangote Refinery and Petrochemical Company in Ibeju-Lekki, Lagos State and oil marketing company, MRS Oil Nigeria Plc, has catapulted MRS to the top of Nigeria’s downstream petroleum industry, Business Hallmark can report.
The fuel distribution deal, which currently ensures that over 40 percent of Dangote Refinery’s refined products released for local consumption pass through MRS, has propelled the firm to the pinnacle of the downstream petroleum industry as the largest operator based on market share.
The stock market has reacted positively to the development, with investors betting heavily on the company as a good investment and financial experts also upping their estimates of the firm’s earnings outlook.
The transformation is a major leap, considering the fact that MRS Oil, though a major distributor, was far behind market leaders in the downstream petroleum sector like Mobil, TotalEnergy and NNPC Retail Limited only a few months ago.
Dangote Refinery, it would be recalled, commenced operations on Friday, January 12, 2024 after a long period of waiting with the production of diesel and aviation fuel. On September 1, 2024, the largest single-train refinery in the world also began processing gasoline.
After it had substantially ramped up production, Dangote Refinery began negotiations with fuel marketers on the modalities for lifting products from the refinery. This include the condition that successful distributors must be bulk purchasers of at least 1 million litres in a single transaction.
While the distribution arrangement of diesel, aviation fuel and other fuel variants between Dangote and marketers took off without hitch, things didn’t work out well with petrol distribution.
In an effort to control (subsidize) the price of the commodity, the Nigerian National Petroleum Company Limited (NNPCL), arm-twisted Dangote Refinery to sell only to it.
The arrangement collapsed in November 2024 when the Federal Government finally ended the subsidy regime, a situation that forced Dangote to revert to its initial distribution arrangement with marketers.
Marketing deal
However, only MRS Oil and NNPC Retail signed up to the arrangement, with major marketers opting to continue to import fuel from abroad.
BH reliably gathered that though NNPC Retail also buys refined products from the refinery, it sources the majority of its fuel needs from abroad, leaving MRS as the major off-taker of Dangote fuels.
Two major marketers, Ardova (formerly AP) and Heyden later joined the fray by signing bulk purchase agreements with Dangote Refinery.
However, with Dangote repeatedly slashing the prices of his petrol and diesel, major marketers and NNPC Retail preference for imported petroleum products had made them play into MRS’s hands.
For instance, Dangote’s decision to crash the price of his diesel has forced down the price of the product from a high of N1,900 in April 2024, to N1,100 on the average of N1,100 in filling stations across the country.
In the same vein, the price of petrol has crashed to below N900 in Dangote Refinery’s partnered stations after the plant effected a downward review of prices three times within the spate of two months.
As a result, Dangote Refinery’s products have become more competitive in the market with partner stations, especially MRS Oil, besieged daily by motorists and Nigerians looking for cheap fuel.
BH findings revealed that MRS now largely controls the retail and wholesale end of the downstream petroleum sector with the help of its supply and distribution assets built over the years.
While MRS was not among the first five leading operators in the downstream petroleum sector before its recent ascendancy to the top of the ladder, it’s not also a novice in the industry.
The firm is one of the six founding members of the Major Energy Marketers Association of Nigeria (MEMAN), established in 2001.
The six founding members of MEMAN are African Petroleum Plc (now Ardova Plc); Conoil Plc; Mobil Oil Nigeria Plc (now 11 Plc); NNPC Retail Limited (formerly Oando Plc) and Chevron/Texaco (MRS Oil Nigeria Plc).
But MRS, before its metamorphosis into a market leader, did not pull its weight, ranking at the bottom of the ladder.
Market Leadership
Despite being a strong player in the midstream petroleum sector with massive assets and investments like tank farms and jetties in Apapa and Tincan Island, it played catch-up to the remaining five MEMAN members in the downstream petroleum sector.
For instance, most of the company’s 586 retail stations in the country are located in Lagos, the Federal Capital Territory (FCT), and in the northern part of the country, where it has a strong presence. Its presence is not that felt in the other geopolitical zones.
However, the firm’s investments in distribution assets are quite impressive, with three depots in Isolo, Apapa and Tincan Island with 150 million liters capacity; a jetty with a draft of 6.8 meters even keel; a lubricant blending and packaging plant; a modern Avjet facilities at the Lagos and Abuja Airports and a truck staging area for more than 1,000 trucks in Isolo, Lagos, among others.
Our correspondent gathered that MRS has been adept at deploying its midstream assets to maximum use, allowing it to displace fuel depots and tank farm owners, who before now dominated the wholesale end through the selling of expensive imported products.
For instance, members of the Independent Petroleum Marketers Association of Nigeria (IPMAN) and Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) who used to patronize private farm owners have almost migrated to MRS for their supplies.
According to a source in MRS, members of the two associations, who are not able to raise the N825 million cash needed to buy the minimum 1 million litres from Dangote Refinery, now get their stocks from MRS at no added cost.
“They can either go to our depots in Isolo, Apapa or Tincan to get their 33,000-litre tankers filled for as low as N27.225million.
“We (MRS) buy from Dangote in bulk and at ex-vessel rates, which is much more lower than the ex-depot/gantry rate of N825. The products are then transported to our depots through the sea.
“So, we can afford to sell at the same rate Dangote is selling to buyers at his fuel gantry”, the source disclosed.
MRS is also giving fuel marketers in the downstream petroleum sector a run for their money.
Many motorists, checks revealed, have been trooping to MRS stations to get cheap fuel. The situation had caused long queues spilling to the roads, while rival stations are devoid of traffic.
As a result of this, many independent fuel station owners are rebranding their filling stations with MRS logo and colours after signing an offtake agreement with the firm.
Dangote’s strategy
An energy expert, who spoke on the condition of anonymity, told our correspondent that Alhaji Aliko Dangote, owner of the refinery, meticulously planned his entry into the oil and gas sector.
“Aliko Dangote’s gambit to have a foothold in the nation’s oil and gas sector petroleum has finally paid off with his companies, West African E&P Venture, Dangote Refinery, and MRS Petroleum becoming market leaders in the nation’s upstream, midstream, and downstream petroleum sectors.
“No doubt, he had expected that this day would come with his heavy investments in the petroleum sector.
“Though most people outside the oil and gas industry don’t know it, Aliko Dangote actually bought Texaco (now MRS) through a consortium led by his half-brother, Sayyu Dantata.
“Those that doubted him are now realizing that the man is not dumb. He got to where he is today through deep thinking and planning.
“After running into troubled waters with the purchase of Port Harcourt Refinery, which was later revoked by former President Yaradua, his plans seem to be taking shape”, the source stated.
BH reliably learned that Dangote’s oil exploration company, West African E&P Venture, is currently drilling oil in two Niger Delta upstream projects, Oil Mining Leases OML 71 and OML 72.
The oil wells started production with around 20,000 barrels per day and are expected to ramp up to 50,000 bpd by the end of the first quarter of 2025.
According to findings, Dangote holds an 85% stake in West African E&P Venture, which in turn has a 45% working interest in the two blocks with proven recoverable resources of 300 million barrels of oil and 2.3m Tcf of natural gas.
The nation owns the remaining 55% of the assets, which is held in trust by NNPCL.
Meanwhile, the market value of MRS Oil has continued to rally in reaction to the distribution deal with Dangote Refinery.
The company’s stock traded at N174.80 at the close of trading on the NGX on Friday, March 7, 2025, compared to N159.70 on December 18, 2024, a day before Dangote Refinery’s announcement of a second reduction in the gantry price of its petrol to N899.50 from N970 on Thursday, December 19, 2024.
The price uptick also lifted MRS Oil Plc’s market value to N59.948 billion on the NGX on Friday, March 7, 2025.
In a regulatory filing in December 2024, MRS Oil said it expects its revenue to reach N129.358 billion in the first quarter of 2025.
Stock market experts predict that the value of the oil firm’s stocks will continue to appreciate as investors bet on it in anticipation of better performance.
