Following the spike in crude oil price and its ripple effect on global and domestic price of petrol, the Nigerian National Petroleum Company Limited (NNPCL) is allocating seven cargoes of crude oil in May for Dangote oil refinery. The increased allocation to the refinery is a move aimed at boosting domestic fuel production.
Reuters quoted Two Trade sources and a refinery official as confirming the development.
“NNPC has allocated more cargoes to Dangote Refinery for May,” a senior Dangote official said. “While this will not completely meet our demands, it can help. We are also in negotiation with NNPC for more volumes.”
But for the month of April, the five cargoes it has been receiving will subsist.
Last week, the Chief Executive Officer, Dangote refinery, David Bird, said the plant was expected to receive about 13 to 15 crude cargoes every month under the crude-for-naira programme but currently gets only five.
Crude oil supply from NNPC are cheaper for the refinery because of lower shipping costs. Recall that Dangote recently had to pay premiums as high as $18 a barrel over the Brent crude benchmark to secure cargoes from the international market, the official said.
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Reuters however noted that an increase in crude allocations to the 650,000 barrel per day refinery could also curb volumes of Nigerian crude available for export at a time when the Iran war has drastically cut supply from the Middle East, forcing buyers to hunt far and wide for available cargoes.
Fuel prices in Nigeria have reached record highs and the Dangote refinery has previously said it could source only about five crude cargoes a month locally, far short of the 13–15 it requires, forcing it to import the rest at prices dictated by the impact of war in the Middle East.
Dangote has raised gasoline supplies to Nigeria’s domestic market this month, meeting the needs of a little more than two thirds of Nigeria’s daily requirements of 60 million litres.
But even the seven cargo allocation is still a far cry from the 13-15 cargoes required quantity by the 650, 000 barrel per day to the refinery, making it to rely on importation of crude oil and feedstock to meet up its production capacity.
But with the Iran, US and Israel on going war, importation has become a challenge, thereby putting the refinery in a tight corner. The implication is that the refinery is exposed to the volatility of prices and this translates directly to motorists.
Last month, the Dangote refinery adjusted upwardly its ex gantry price of petrol and other products five times as a result of the volatility in the market.
For instance, in early March, following the outbreak of the Iran, US, Israel war which impacted global crude oil price, prices at therose at the refinery from ₦774 to ₦875, ₦995, and ₦1,175 per litre.
On March 11, Dangote refinery reduced the ex gantry price to ₦1,075 per litre; raising it to N1, 245 per litre on March 21. Still later in March, it further made upward revisions to its price to ₦1,275 per litre before later reducing same to ₦1,200 per litre.
These constant reviews were attributed to escalating global crude oil prices, particularly due to tensions in the Middle East.
Stakeholders agreed that the decision to increase cargo supply to Dangote Refinery is a welcome relief as this will cushion the effect of the rising cost of petrol domestically and give a buffer to the country against the full weight of the crude oil global volatility.
THE NATION
