By Ifeanyi Izeze
Here is the highlight of the agency report that has been causing Nigerians to wonder if the country is actually still existing or just a mere nameplate geographical expression of a failed state: Nigerian refiner (Dangote Refinery) seeks 2 million barrels per month of American West Texas Intermediate (WTI) crude oil grade (very similar to the Nigerian premium grade- the Bonny Light) from July 2024.
In a tender that closed May 21, Dangote sought to lock in 2 million barrels per month of WTI Midland crude oil from July 2024, in a proposed 12-month offtake agreement amounting to 24 million barrels. Competitive pricing and security of supply seem to have driven purchasing decisions of the 12-month tender issued.
When we did not have any of the nation’s existing refineries functioning to churn out products for domestic consumption, Nigeria was importing Premium Motor Spirit (PMS), popularly called petrol, kerosene and Automotive Gas Oil (AGO), popularly called diesel. The Federal Government told us it would stop the importation of petroleum products once our refineries come on stream.
Now that the almighty 650,000 barrels per day Dangote Refinery is coming onstream, we have almost stopped importing some refined petroleum products and instead have now started importing crude oil for the plant to run on.
Can somebody please help me understand Nigeria?
How do you explain that the Lagos-based Dangote Refinery in which the state-owned oil concern, the Nigerian National Petroleum Company Limited (NNPCL), holds a 20 percent equity stake is very early in its life turning to non-Nigerian crude feedstock for its processes?
How does this support the nation’s domestic production and the ailing Nigerian crude marketing?
If Dangote Refinery saw the West Texas Intermediate (WTI) Midland as being a competitively valued barrel, against the FOB Nigerian, how did the NNPCL see its own crude grade to have allowed for the offshore sourcing of the American crude to replace the Nigerian premium basket?
As widely expected, the NNPC, a 20 percent equity holder in the project, was expected to supply the bulk of Dangote’s crude feedstock demands, selling to the refinery either in Naira or USD due to its location in the Lekki free zone. So, what went wrong with that arrangement?
If Dangote Refinery can go to the US to import the crude feedstock for its processes because of cost and availability issues, so what happens to Port Harcourt, Kaduna, Warri, and BUA refineries when they finally come on stream (that’s if the state-owned plants would ever resurrect from the dead)?
That means the NNPC will again come to tell us “the plants cannot get enough crude oil locally for the production of petroleum products after they are fully ready,” abi?
Already, the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, had issued an early warning that “the refineries and modular refineries in the country might not get enough crude oil locally without an increase in production in the sector.” Hope Nigerians understand what this means.
The only explanation thus far given by foreign analysts is that the “supply of Nigerian crude is insufficient or unavailable and sometimes unreliable. West Texas Intermediate (WTI), on the other hand, is available, with reliable supply and competitively priced.
“Buying different feedstocks also provides flexibility and optionality for the refinery, so the tender makes economic sense for Dangote.”
Is it not surprising that Dangote Refinery is seeking the term WTI at this stage of its operation? The plant, currently running at about half capacity, is taking advantage of cheaper US oil imports for as much as a third of its feedstock. Since the start of this year, it has received at least one supertanker carrying about 2 million barrels of WTI Midland each month.
As reported, the fear expressed by Dangote was that while NNPC may be able to fulfil the refinery’s crude requirements at this ramp-up stage, it could struggle to exclusively fulfil demand from the plant at full utilisation, and this may leave the refiner exposed to supply disruptions.
According to Agency reports, the refinery took delivery of 11 WTI cargoes, or 9 million barrels, between February and May, contrasting with around 18 million barrels of Nigerian crude deliveries.
The bitter truth is that Nigeria does not know for sure how much crude is pumped from its oil fields (particularly offshore) on a daily basis. And all the crude we currently produce has been sold on a FOB basis with huge sums in Dollars collected ahead by a few privileged dubious Nigerians who ran the Buhari Presidency and some in and around the Tinubu Presidency also with their foreign cronies, especially Americans, Chinese, and few Indians.
So, anybody shouting about under-production should bury his head in shame because Nigeria is not under-producing at all. It is just that the dubious NNPC leadership and their cronies in the Presidency had conspired to allot themselves and sold off the anticipated produce running into years to come. So, we pump without getting revenue into our national coffers because some people don chop the money in advance.
The palliative measures recently announced by Nigeria’s upstream regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), to compel oil producers to sell crude to domestic refineries is only a wild goose chase. As revealed by NUPRC, oil producers are allowed to export crude only after meeting these domestic supply obligations.
How can you be mandating all oil-producing companies in Nigeria to supply crude to domestic refineries as priority off-takers when the crude is not there to be off-taken?
The US’s current domestic production by deliberate design does not even cater for half of what they consume hence they use offshore sourcing from OPEC countries, including Nigeria, to augment their domestic needs and their strategic reserve base. So, they got our crude almost as a dash because of corruption in NNPC and the APC–led Buhari Presidency/government and now they are exporting to us at their own price/terms. What kind of a country is this for God’s sake?
Nobody should come up with that trash of crude oil theft to justify the nation’s zero earnings from its oil because what happens at the nation’s deep and ultra-deep offshore is not crude oil theft but organised crime supervised by NNPC leadership and their masters at the Presidency both Buhari’s and now Tinubu’s.
By the way, how much could the NNPC boss have given to Bola Tinubu towards actualising his presidential ambition that he’s left still in charge with the same old wives’ fables? In saner climes, the NNPCL boss, who sat over most of these sleazy deals, should actually be telling the EFCC/DSS the much he knows about what is happening with our produced crude oil.
President Bola Tinubu is not only ill-prepared for the job, he is grossly aloof and incompetent and without mincing words, his failures and flip-flops are inexcusable.
Wale Edun is your Minister of Finance and the Coordinating Minister of the Economy. The fact that Wale still has his job over a week after the Chief Executive Officer of Total Energies took a whopping $6 billion investment to Angola is all the proof you need.
Do you know what a $6 billion investment would have done for a country on its knees like Nigeria under Tinubu in terms of its GDP Growth and weak employment numbers?
According to the IMF, Nigeria’s $375 billion GDP is going to shrink to a $253 billion Economy by the end of 2024.
