The Nigerian Upstream Petroleum Regulatory Commission ( NUPRC), has received accolades from Dangote Industries Ltd. for its multiple interventions in the oil company’s demands for crude supplies from international oil companies. In a statement released in Lagos on Wednesday, 17 July 2024, Dangote Industries Vice President Mr. Devakumar Edwin applauded the commission.

To further promote transparency in the oil industry, he stated that NUPRC ought to be applauded for releasing the standards for the Domestic Crude Supply Obligation (DCSO). “We will deal directly with the companies producing the crude oil in Nigeria as stipulated by the PIA if the Domestic Crude Supply Obligation (DCSO) guidelines are diligently implemented,” he stated.

According to him, the company has continuously encountered difficulties in obtaining locally produced oil to be used as feedstock for its refining process from IOCs operating in Nigeria. He emphasized that the oil company was occasionally given cargoes at a premium of two to four dollars per barrel by the trading arms, which was more than the official price set by the NUPRC.

“For instance, in April we paid $96.23 per barrel (transport excluded) for a cargo of Bonga crude quality. The cost was $90.15 for the dated Brent price plus $5.08 for the NNPC premium (NSP) and $1 for the trader premium.

“We were able to purchase WTI in the same month at a dated Brent price of $90.15 + $0.93 trader premium (transport included). When NNPC subsequently dropped their premium based on market criticism that it was too excessive, some traders then started asking us for a premium of up to four million dollars over and above the NSP for a shipment of Bonny Light.

“According to data from sites like Platts and Argus, the price that is being offered to us is far more than the market rates that these platforms evaluate. Edwin stated, “We recently had to escalate this to NUPRC,” and he asked the regulatory commission to reconsider the pricing issue.

His remarks came after a statement made by Gbenga Komolafe, the Chief Executive Officer of NUPRC, who said in an interview on ARISE News TV that it was “erroneous” to assert that IOCs were not providing crude oil to domestic refiners. The PIA’s need for a willing buyer-willing seller relationship was also mentioned by Komolafe in the statement.

“The NUPRC has consistently intervened to help ensure the supply of crude oil, showing strong support for the Dangote Refinery. Edwin explained, “Yet, Komolafe’s statement might have been misunderstood; IOCs have been challenging to deal with directly.” Edwin pointed out that, aside from the Nigerian National Petroleum Corporation Ltd. (NNPCL), the company has only bought oil directly from one other regional supplier, Sapetro.

They are referred by other producers to their foreign trading arms, who serve as middlemen and profit from crude produced and consumed in Nigeria without having to comply with Nigerian regulations or pay local taxes on their profits. He also related an instance in which an IOC’s trading division recommended utilizing an intermediary rather than selling to Dangote Refinery directly.

The problem was resolved with NUPRC’s assistance after nine months of discussion. When we entered the market to buy oil for August, International Trading Arms told us they had submitted their Nigerian cargoes into a Pertamina (the Indonesian National Oil Company) contract. To find out what was available, he stated, “We had to wait for the tender to conclude.”

Edwin asked NUPRC to review pricing, stressing that a willing seller-willing buyer basis required market liquidity. He proposed that to prevent price gouging, domestic crude supply obligations should include volume obligations per producer and transparent pricing methods. “The existence of gaps in the domestic crude supply obligation as outlined in the PIA does not negate the need for wisdom to prevail,” Edwin stated. NAN

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