Dangote Refinery: Nigeria must enforce crude oil supply to local refiners
The Dangote Oil Refinery called on Nigeria's regulator of upstream oil to enforce a law which stipulates that producers supply local refineries. It said that the lack of enforcement increased its operating costs.
The 650,000-barrel-per-day capacity refinery, built by Africa's richest man Aliko Dangote on the outskirts of Lagos for $20 billion, has struggled to get sufficient supplies from Nigeria, where vandalism and low investment impede oil production.
In a Friday statement, Dangote Refinery alleged that the Nigerian Upstream Petroleum Regulatory Commission had failed to enforce the Domestic Crude Supply Obligation. This is a provision which requires crude oil producers supply domestic refiners a portion their production.
In a statement, Anthony Chiejina said, "Our concern is that the NUPRC pushes, but international oil companies do not follow the instructions."
He said: "We often buy the same Nigerian crude oil from international traders for an additional $3 to $4 per barrel, which translates into $3 to $4 million per cargo."
The refinery expects to receive 15 cargoes in September, of which NNPC has allocated six.
In a press release, the NUPRC stated that some producers faced operational difficulties while others had pledged a large portion of their production to oil traders financing drilling. The NUPRC also stated that forcing producers to increase their supply would be a violation of their contracts.
Data from the regulator shows that Dangote Refinery needs 325,000 bpd in supply. However, since January when it began operating, it has only received half of this amount.
The DCSO is a result of Nigeria's 2021 Petroleum Industry Act. However, it has been difficult to enforce because the state-owned Nigerian National Petroleum Corporation uses a large portion of its oil production to secure crude-backed loans.
In its scramble to compete, the Dangote Oil Refinery also has a dispute with downstream regulators over fuel imports. (Reporting and editing by Miral Fahmy; Isaac Anyaogu)
(source: Reuters)
