The Nigerian National Petroleum Company Limited said on Thursday that it would provide six million barrels of crude oil to the Dangote Refinery. This action is in reaction to recent worries about crude oil shortages hurting the refinery’s operations, with the Federal Government citing poor oil production as the root cause.
In response to the report, NNPCL sources indicated that the oil company planned to supply six million barrels of crude oil to the refinery in December.
A top official of the oil firm, who wishes to remain anonymous stated.“In a major step towards boosting domestic refining and attaining energy security, NNPC Ltd is set to allocate six million barrels of crude oil to Dangote Refinery in December 2023.”
The official added “This development came as plans have since been firmed up for the signing of a sales and purchase Agreement between the national oil company and the refinery, taking place soon in Abuja.”
In the meantime, sources with knowledge of the situation from both parties confirmed that the deal was fully commercial and did not entail any discounts or selling at unusually low prices, contrary to some media conjecture.
The domestic crude oil supply obligations to several refineries, including the Dangote Refinery, NNPCL refineries in Port-Harcourt, Warri, and Kaduna, are outlined in Section 109 of the Petroleum Industry Act (2021).
This section also underlines the importance of voluntary crude oil supply to the domestic market between willing consumers and willing suppliers.NPCL has already purchased an ownership part in the Dangote Refinery and plans to begin supplying crude oil to this plant.
The insufficient supply of crude oil to domestic refineries, notably the important Dangote Refinery, had created a delay in the manufacturing of refined petroleum products at these facilities. Notably, the Dangote Refinery in Lagos, with a capacity of 650,000 barrels per day, fell short of its October output target, raising fears about the end of Nigeria’s petroleum imports in 2023.
Despite this, the delay in production means that Nigeria will continue to rely on fuel imports until NNPCL begins supplying crude oil to the facility in December of this year.
This circumstance underscores the difficulty of crude oil shortages at domestic refineries, in addition to Nigeria’s ongoing imports of refined petroleum products. According to industry sources, approximately five additional modular refineries are ready to begin producing refined petroleum products.
However, due to a lack of crude oil, these refineries have been unable to begin production. Furthermore, industry sources have indicated that the Dangote Refinery in Lekki, Lagos, has not yet received the necessary volumes of crude oil for the production of refined products.