—- Says local price will continue to increase because Trading arms offer cargoes at $2 to$4 per barrel above NUPRC original price
—- Insists IOCs are frustrating its crude Supply demands
The Management of Dangote Industries Limited (D I L) have commended the Nigerian Upstream Petroleum Regulatory Commission ( NUPRC) for its various interventions in the oil company crude Supply requests from International Oil Companies (IOCs), and for publishing the Domestic Crude Supply Obligation (DCSO) guidelines to ensure transparency in the Oil Industries.
Vice President, Oil and Gas, Dangote Industries Limited, Mr. Devakumar Edwin however said that if the Domestic Crude Supply Obligation ( DCSO) guidelines are diligently implemented, this will ensure that deal directly with the companies producing the crude in Nigeria as stipulated by the Petroleum Industry Act (PIA).
Edwin insisted that IOCs operating in Nigeria have consistently frustrate the company requests for locally produced crude as feedstock for its refining process. He highlighted that when cargoes are offered to the oil company by the trading arms, it is sometimes at $2 to$4 (per barrel) premium above the official price set by NUPRC.
“As an example, we paid $ 96.23 per barrel for a Cargo of Bonge crude grade in April (excluding transport). The price consisted of $19.15 dated brent price +$1.08 NNPC premium ( NSP) + 01 trader premium. In the same month we were able to buy WTI at dated brent price of $90.15 + $80.93 trader premium including transport.
When NNPC subsequently lowered its premium based on market feedback that it was too high, some traders then started asking us for premium up to $4million over the NSP for a cargo of Bonny light.
“Data on platforms like Placts and Argus shows that the price offered to us is way higher than the market prices tracked by this platforms, we recently had to escalate this NUPRC.
Edwin said, and urged the regulatory commission to take a second look at the issue of pricing. Edwin’s response came against the background of a statement by the Chief Executive Officer of NUPRC, Engr. Gbenga Komolafe, who in an interview on ARISE NEWS TV said that it is erroneous for one to say that the International Oil Companies IOCs are refusing to make crude oil available to domestic refiners, as the Petroleum Industry Act (PIA) has a stipulation that calls for willing buyer – willing seller relationship.
He noted that the Commission has been very supportive to Dangote refinery as it has intervened several times to secure crude supply, Edwin however insisted that the NUPRC Chief Executive was probably misquoted by some people hence his statement that IOCs did not refuse to sell.
To set the records straight we would like to recap the facts below. “Aside from the Nigerian National Petroleum Company Limited -NNPCL to date have only purchased crude directly from only one local producer Sapetro Allah other producers refer us to their international trading arms.
This International trading arms are non – value – adding middleman who sit abroad and earn margin from crude being produced and consumed in Nigeria. They are not bound by Nigerian laws and do not pay tax in Nigeria on the unjustifiably margin they earn.
The trading arms of the IOCs refused to sell to us directly and asked us to find a middleman who will buy from them and then sell to us at a margin. We dialogued with them for nine months and in the end, we had to escalate to NUPRC who helped resolve the situation, Edwin stated.
According to him, when we entered the market to purchase our crude requirement for August, the International trading arms that they entered their Nigerian cargoes into Partamina ( the Indonesia National Oil Company) tender, and we had to wait for the tender to conclude to see what is still available.
“This is not the first time. In many cases, particular crude grades we wish to buy are sold to Indians or other Asian refiners even before the cargoes are formally allocated in the curtailment meeting chaired by NUPRC.”
He urged NUPRC to take a second look at the issue of pricing, having severally asserted that transactions should be on a willing – seller – willing – seller basis. The challenge, however is that market liquidity (many sellers/ many buyers in the market at the same time is a precondition for this, where a refinery needs a particular crude grade loading at a particular then there is typically only one participant on either side of the market.
“It is to avoid the problem of price gouging in an illiquid market that the domestic gas supply Obligation specifies volume obligation per producer and a formula for transparently determining the price. The fact that the domestic crude supply obligation as defined in the PIA has gaps is no reason for wisdom to prevail,” Edwin stated.
