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On Thursday, the Nigerian National Petroleum Company Limited announced its commitment to supply six million barrels of crude oil to the Dangote Refinery. This move comes in response to recent concerns over crude oil shortages affecting the refinery’s operations, with the Federal Government acknowledging the issue of low oil production as the cause.
In reaction to the report, sources at the NNPCL stated that the oil firm was set to deliver six million barrels of crude oil to the refinery in December.
A top official of the oil firm, who wishes to remain anonymous stated.“In a major step towards boosting domestic refining and attaining energy security, NNPC Ltd is set to allocate six million barrels of crude oil to Dangote Refinery in December 2023.”
The official added “This development came as plans have since been firmed up for the signing of a sales and purchase Agreement between the national oil company and the refinery, taking place soon in Abuja.”
Meanwhile, individuals with knowledge of the matter from both parties affirmed that the agreement was entirely commercial and did not involve any discounts or selling at exceptionally low prices, contrary to some media speculations.
According to Section 109 of the Petroleum Industry Act (2021) outlines the domestic crude oil supply obligations to various refineries, including the Dangote Refinery, NNPCL refineries located in Port-Harcourt, Warri, Kaduna, and modular refineries.
This section also emphasizes that the supply of crude oil to the domestic market should be conducted voluntarily between willing buyers and willing suppliers. NPCL has already acquired an equity stake in the Dangote Refinery and is set to commence the supply of crude oil to this facility.
Why Dangote refinery did not meet its October production target
The lack of crude oil supply to domestic refineries, including the significant Dangote Refinery, had caused a delay in the production of refined petroleum products at these establishments. Notably, the Dangote Refinery, with a production capacity of 650,000 barrels per day in Lagos, fell short of its October production target, raising concerns in 2023 regarding the end of petroleum importation in Nigeria.
Nonetheless, the delay in commencing production means that Nigeria will continue to depend on fuel imports until NNPCL initiates the supply of crude oil to the plant in December this year.
This situation reflects the challenge of crude oil shortage at domestic refineries amid Nigeria’s ongoing imports of refined petroleum products. Industry sources have indicated that approximately five additional modular refineries are prepared to initiate the production of refined petroleum products.
However, these refineries have been unable to commence production due to the scarcity of crude oil. Furthermore, it has been reported by industry sources that the Dangote Refinery located in Lekki, Lagos, has not yet received the necessary quantities of crude oil required for the production of refined products.
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