Dangote Refinery Accuses NNPCL of Failing to Meet Crude Oil Supply Commitments
The Dangote Petroleum Refinery has raised concerns that the Nigerian National Petroleum Company Limited (NNPCL) has not adhered to its crude oil delivery commitments under the government’s naira-for-crude initiative. The refinery claims that the amount of crude oil received from NNPCL is far below the required volumes to meet production targets.
NNPCL’s Supply Shortfall
According to an interview with Devakumar Edwin, Vice President of Dangote Industries, the refinery has been receiving only a fraction of the agreed-upon 385,000 barrels per day (bpd) from NNPCL since the program’s launch in October. The refinery had expected to receive 650,000 bpd to ramp up its production capabilities, but deliveries have been significantly lower than required.
Challenges with Naira-for-Crude Arrangement
In July, the Nigerian government introduced the naira-for-crude arrangement, which allows the sale of crude oil in naira to local refineries. This initiative was aimed at addressing the challenges faced by refineries in accessing foreign currency. However, Dangote Refinery is struggling to secure sufficient crude under this arrangement, having received only four cargoes as of last month.
Dangote’s Search for Alternative Crude Sources
With local supplies falling short, Dangote Refinery has turned to international markets for crude oil. Recently, the refinery made its first purchase of U.S. WTI Midland crude since August, acquiring two million barrels. This move underscores the ongoing difficulty local refineries face in sourcing enough crude to maintain operations.
NNPCL’s Response and Ongoing Negotiations
While NNPCL has not yet responded to requests for comment, the shortfall in crude supply has caused significant concern. Mathins Obaze, acting Executive Director of the Crude Oil Refinery-Owners Association of Nigeria, confirmed that Dangote is currently the only refinery benefiting from the naira-denominated crude sale. Other local refineries are still unable to access crude in naira and are in negotiations with the government for a resolution.
The Future of Dangote Refinery
Despite these setbacks, the Dangote Refinery, with a planned capacity of 650,000 bpd, remains one of the largest industrial ventures in Nigeria. Once fully operational, the refinery aims to compete with major European players in the global refining market. However, its ability to operate at full capacity hinges on securing a reliable and consistent supply of crude oil, whether from local or international sources.
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