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LAGOS — The refinery owned by Africa’s richest man has reignited its dispute with Nigerian energy regulators. It said it has been offered inadequate crude oil supply despite projecting a 70% increase in its needs by the end of the year.
Nigerian petrol vendors are eagerly anticipating the rollout of fuel from the Dangote Refinery that the company planned for this month. Nigeria has long imported the vast majority of its fuel despite traditionally being Africa’s biggest crude oil producer due to its moribund state refineries. Nigerian industrialist Aliko Dangote has said his company hopes to end that system.
The government approved a plan to allow state oil company NNPC to sell oil in the local naira currency to the refinery late last month, after a dispute that has persisted in recent months over Dangote Refinery’s claim that it is unable to buy oil from Nigeria’s local market.
But, in two statements over the weekend, the company fired a fresh salvo in the row. Its latest grievance focused on NUPRC, which oversees the upstream oil and gas industry.
The agency has “only facilitated the purchase of one crude cargo from a domestic producer,” Dangote said, leaving the refinery to rely on international traders for the rest of its need.
“We often purchase the same Nigerian crude from international traders at an additional $3 - $4 premium per barrel which translates to $3 - $4 million per cargo,” the refinery said in a separate statement. NNPC has only allocated six of the 15 cargoes of oil the refinery needs for its operations in September, the company said.
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Room for Disagreement
NUPRC said it supplied “32 million barrels of crude to Dangote Refinery and other local producers in the first half of 2024,” in response to the refinery’s complaints.
This is the latest development in a series of public disagreements with Nigerian regulators. A recent war of words involved a regulator of the downstream sector that accused the refinery of seeking a monopoly.
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The fate of a $20 billion facility is at stake in the ongoing dispute over access to crude oil. The refinery is the biggest undertaking by Dangote, whose fortune of more than $12 billion — built from cement, food and real estate assets — makes him Africa’s richest individual.
His 650,000 barrels a day refinery in Lagos state, built to run primarily on Nigerian crude oil but with capacity for other variants, opened for business this year. After a run rate of 325,000 barrels per day from January to June, the refinery plans to incrementally scale up to 550,000 by December.
But frictions with regulators over supply have emerged as a credible threat to living up to its ambitious promise of freeing Nigeria from dependence on imported fuels. It is in a race against time to achieve the promised gasoline rollout this month. Some local media outlets have reported that marketers are pessimistic that the company will meet the planned rollout.
The company has hinged its complaints and demands on the Petroleum Industry Act, a landmark 2021 law that reformed governance of Nigeria’s oil sector. The law sets the terms for domestic crude oil supply obligations between refineries and local oil producing companies. “It is a law and they just need to comply,” the refinery said.
In the meantime, the company — which has imported crude from Brazil and the US — is exploring options to fill the supply gap. Libya and Angola are being considered.
Notable
The West Texas Intermediate Midland, a light grade of crude oil, has “accounted for 30% of crude delivered to Dangote through 18 cargoes,” according to London-based commodities data platform S&P Global Commodity Insights.