NNPC Increases Crude Supply to Dangote Refinery Amid Oil Price Surge

The Nigerian National Petroleum Company Limited has ramped up crude oil supply to the Dangote Petroleum Refinery in a bid to stabilise fuel availability nationwide, as global oil prices climb with Brent crude trading around $110 per barrel on Wednesday.

This comes amid heightened global oil market volatility occasioned by tensions in the Middle East and growing reliance on local refining to meet Nigeria’s petroleum product demand.

Speaking during a webinar hosted by the Major Energies Marketers Association of Nigeria, the Managing Director of NNPC Retail Limited, Hubb Stokman, said the national oil company remains central to ensuring supply security through its statutory role.

“NNPC remains committed to its statutory role, of course, as supplier of last resort, making sure of the stability and continuity of supply of petroleum products across the country,” he said.

Stokman explained that the company is working closely with the Nigerian Midstream and Downstream Petroleum Regulatory Authority and other stakeholders to guarantee an uninterrupted supply of crude and refined products nationwide.

“But to be very clear, the NNPC does that by working very closely with the NMDPRA and all the other relevant agencies because it is important. We’re not a regulator, but we have this role to play,” he added.

He noted that with established supply channels, including domestic production and imports where necessary, the NNPC is positioned to maintain stable product availability.

“We’re confident that with established supply channels, both with production and imports functioning effectively in line with the Petroleum Industry Act, we can take all the necessary measures to guarantee adequate crude supply and uninterrupted availability of products nationwide. So, I think that’s the role, and that’s what we do,” it was stated.

Amid the surge in fuel prices occasioned by tensions in the Middle East, the NNPC was sourcing third-party crude for the Dangote refinery.

This was as the Dangote refinery lamented that it was not getting enough crude locally for its operations.

As the Iran-US war continues to disrupt global oil supply, the Dangote refinery has effected multiple fuel price increases in less than a week, raising petrol pump prices above N1,200 per litre at the moment.

Defending these price hikes, the Dangote refinery said local crude producers were refusing to supply feedstock to its facility, forcing it to rely more on imported crude.

According to the company, the refinery also received just five cargoes every month from the national oil company instead of 13 cargoes, adding that the cargoes are paid for at international market prices.

“Furthermore, while we receive about five cargoes a month from NNPC, which we pay for in naira, these cargoes are priced at international market prices plus premium and fall short of the 13 cargoes which we require to support sales into Nigeria.

“The high crude cost is compounded by the fact that Nigeria’s upstream producers have failed to supply crude oil to the refinery as required under the Petroleum Industry Act, forcing us to source a substantial portion through international traders who charge an additional premium,” it stated.

However, reliable sources at the NNPC, who pleaded anonymity due to the sensitivity of the matter, confirmed to our correspondent that the company is leveraging its global crude trading network to source third-party crude for the 650,000-barrel Lekki refinery.

According to the source, the NNPC would sell the crude to the refinery at prices that are competitive with prevailing international market rates, ruling out calls by some stakeholders that the Federal Government should sell feedstock to local refineries at rates designed locally to shield Nigeria from the global price rise.

“Leveraging our global crude trading network, we are sourcing third-party crude for the refinery at prices that are competitive with prevailing international market rates,” an official said.

Speaking on supporting domestic refining, especially the Dangote refinery, a source told our correspondent that going by the existing agreements between the NNPC and Dangote, the NNPC will continue to facilitate crude supply to the facility, even in the face of temporary constraints.

“As the national oil company entrusted with safeguarding Nigeria’s energy security, NNPC Limited remains fully committed to supporting domestic refining, including the Dangote Petroleum Refinery. Within the framework of our existing agreements, we continue to facilitate crude supply to the refinery in the face of temporary availability constraints,” he explained.

Earlier, a shortfall was reported because some volume of NNPC’s daily crude output had been front-sold in the past.

“Indeed, there’s a shortfall, but it wasn’t deliberate. You know that some volumes have been front-sold in the past. That is causing some form of distortion, but that doesn’t mean the NNPC will not meet up. The company is looking at other alternative sources,” another industry official stated.

The push to strengthen crude supply to local refineries comes as Nigeria increasingly depends on domestic refining capacity, particularly from the Dangote refinery, to reduce reliance on imports and improve energy security.

Industry stakeholders have, however, raised concerns over concentration risk, given the scale of the Dangote facility relative to other refineries in the country.