Amidst lingering supply bottlenecks in the petroleum downstream sector, the uncertainty around pricing has pitched the management of the Nigerian National Petroleum Company Limited (NNPCL) and that of Dangote Refinery in a battle to determine petrol price acceptable to all stakeholders in the petrol supply value chain.
The bone of contention includes the social impact factor in balancing market with affordability.
Vanguard learned that a wide gap exists between offer prices given by both parties, a situation which has stalled the negotiations for over two weeks now, making it difficult for Dangote to go ahead with rolling out its product to local marketers.
Insider sources told Vanguard that while NNPCL is going for a subsidy-compatible pricing, Dangote is positioning for a market-reflective pricing.
But the source said both parties are fully aware of each others’ constraints, and they are now going for a middle ground that will ensure stability and sustainability in both supply and pump price.
Another round of meeting, according to the source, has been scheduled for today at NNPCL headquarters where a likely shift in grounds may be achieved.
Chief Corporate Communications Officer of NNPC Ltd, Olufemi Soneye, who confirmed the negotiations, told Vanguard that they are optimistic that a mutually-agreeable price and other terms would be reached eventually.
He, however, said that NNPCL will be guided by its obligations as provided under the Petroleum Industry Act, PIA, in agreeing to any price.
We are working to clear supply backlog —NNPC
Meanwhile, the NNPCL said its purchasing portal will be reopened as soon as backlog of orders for petrol is cleared.
Marketers had complained about the portal shutdown, adding that it encourages round-tripping of product supplies, while driving up prices of petroleum products.
In a press statement yesterday, Soneye, said: “We have a significant backlog to address. The closure is intended to prevent us from holding marketers’ funds for an extended period.
“It will be reopened once the backlog has been sufficiently reduced. We are working to address it as soon as possible.”
However, speaking at a just-concluded webinar – ‘Optimising the Nigerian Oil and Gas Industry’ – Chairman, Major Energies Marketers Association of Nigeria, MEMAN, Huub Stokman, called for increased collaboration among oil and gas downstream stakeholders to provide quality products and services to consumers.
Stokman stressed the importance of unity among businesses, government agencies, and regulatory bodies to ensure affordable services and products.
He said: “Our primary focus should be on our customers. While running our organizations is important, our ultimate responsibility is to deliver quality goods and services.”
Stokman noted the need for better infrastructure, such as roads and pipelines, to improve product distribution across Nigeria, adding hoarding and high operating costs, due to inflation and inadequate logistics, were impacting the sector.
He also stressed the importance of energy transition and environmental sustainability, urging a shift towards Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG), and renewable energy sources, including solar power and electric vehicle (EV) infrastructure before proposing the formation consultative committees similar to Nigeria’s Bankers Committee.
Similarly, the Chief Executive Officer, Rainoil Limited, Gabriel Ogbechie, noted that the price of petrol has surged by 60 per cent to approximately N1,230 per litre in the past few weeks.
Ogbechie made a case for increased investment in infrastructure, including ports to enhance delivery of products and services to consumers.
On his part, President of the Petroleum Retail Outlet of Nigeria, Dr Billy Gillis-Harry, stressed the benefits of deregulation, including increased efficiency, government revenue, and regular availability of petroleum products.
Also, Executive Secretary of the African Refiners and Distributors Association, ARDA, Anibor Kragha, harped on energy security, while stressing the need for value addition in the midstream and downstream sectors.
Marketers petitioned President Tinubu over diesel price —Dangote
In a related development, indications have emerged that a new pricing template for diesel may be underway, as marketers of petroleum products in Nigeria, yesterday, petitioned President Bola Tinubu over the low price of diesel at N900 per litre.
Dangote refinery has consistently reduced price of the product from N1,200 to N1,000 and now N900 per litre, in the past few months.
Vice President, Dangote Industries Limited, Devakumar Edwin, who disclosed this development, said marketers of petroleum products in Nigeria, have complained that the relatively low price has affected their revenue and profit margins.
Speaking at a Twitter Space session organized by Nairametrics, Edwin said the refinery currently struggles to sell about 29 tankers of diesel daily due to low patronage from marketers of petroleum products.
Edwin said the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) wrote to President Bola Tinubu that the price cut affected their business “due to the large inventory of imported AGO”.
Edwin highlighted some challenges facing the Dangote Refinery while stressing its impact on Nigeria’s fuel supply and prices.
He said: “As a result of this poor local patronage, the refinery exports most of its diesel and aviation fuel.
“We have been exporting aviation fuel, we have been producing kerosene, we have been producing diesel, but yesterday, we started the production of PMS (petrol). So, that was the last stage. The only thing now left out is petrochemicals.
“So, the good news for the country is we have started producing PMS from our refinery,” he had said on a radio programme.
He stated further: “But if the traders or NNPC are not buying the product we will end up exporting the PMS as we are doing with the aviation jet and diesel.
“The philosophy is to take the crude, and instead of exporting the crude, refine it, add value; export the finished products, and supply the finished products locally. But unfortunately for us, we started facing challenges with the crude supply.
“What is happening today? We are struggling to get the crude. We are now importing crude from the US, we are importing from Brazil, and from other parts of the world. So, the whole philosophy has gone upside down. After all these decades, we are exporting crude, importing products.
“The same thing is continuing. We are not getting enough crude allocation, and the crude is still being exported. We are forced to import crude from outside. Yes, we are getting some crude locally, but it’s not adequate.”
In its recent statement, the company quoted the Economist Intelligence as stating that further delays in crude oil feedstock to the Dangote Petroleum Refinery and Petrochemicals could jeopardise Nigeria’s economic recovery and put additional pressure on the naira.
It stated: “The research and analysis division of the Economist Group said the Dangote Refinery which began production in January has encountered setbacks in petrol production due to a shortage of crude oil feedstock.
“It said the $20 billion facility has successfully exported various products, including fuel oil, naphtha, nitrogen fertilisers, gas oil, jet fuel, and diesel but has been able to ramp up petrol production due to challenges in sourcing adequate crude oil.
“These delays are expected to have significant economic repercussions for Nigeria, potentially worsening the already strained relationship between public finances and the management of the naira, the country’s currency.”
Edwin also disclosed that Dangote Refinery has been forced to export 97 per cent of its refined products due to low patronage by local oil marketers.
His words: “The conglomerate of all the importers is refusing to buy from us. It is very strange that after putting up the refinery to supply the products locally, I have to export every diesel and jet fuel because they do not want to buy from us,” Edwin said.
He added: “We started selling the diesel, we fixed the price, and it was lower than the prevailing market price. Then, we brought the price further down and they (marketers) wrote to the president, complaining.
“I’m selling 2 per cent to 3 per cent to small traders who are willing to buy, while the rest 95 to 97% I’m forced to export.”
He said the refinery may also be forced to export its petrol “if they are not willing to buy”.
Confirming the negotiations with NNPCL over price and other conditions of sell, he said: “But to be very frank and straightforward, the Nigerian National Petroleum Company (NNPC) has come forward.
“They have been discussing. Although the discussion has been going on for almost three weeks and it is not yet concluded, they are working to agree with us on the quantity of crude they can sell and they said they will monitor the products.
“They are going to have a team of 10 people sitting in the refinery. They will see the crude which we are going to receive, ensuring that everything is coming into the refinery, and they would watch whether we are producing and processing everything and then, they would watch whether we are giving back all the products,” Edwin said.
