In a key development for Nigeria’s energy sector, the Dangote Refinery has started direct petrol supply to oil marketers, aiming to stabilize fuel availability and reduce dependence on imports. Learn more about the impact of this move.
The Dangote Petroleum Refinery has begun directly supplying Premium Motor Spirit (PMS), also known as petrol, to oil marketers, bypassing the Nigerian National Petroleum Company (NNPC) Limited.
This action represents a major transformation in Nigeria’s fuel distribution sector.
According to reports, an increasing number of oil marketers are now opting to buy petrol directly from the Lekki-based refinery, which follows a willing-buyer, willing-seller model.
This development occurs as other marketers persist in relying on imports, with hundreds of millions of liters of imported PMS anticipated to arrive at Nigerian ports within the next two weeks.
According to sources, from Friday, October 18, to Sunday, October 20, four vessels arrived at the country’s seaports carrying roughly 123.4 million liters of imported PMS.
This is consistent with earlier reports indicating that oil dealers intend to import fuel to complement the supplies from the $20 billion Dangote refinery.
“Marketers are currently visiting the refinery to collect PMS directly rather than using a third party,” said the reliable official, who requested anonymity due to not being authorized to discuss the matter.
The source, unable to specify the price at which marketers were obtaining the product, pointed out that oil dealers would not participate if the pricing wasn’t advantageous for them.
“We have finalized agreements with some marketers, and more negotiations are still underway. I don’t know the exact price, but if it wasn’t favorable, the marketers wouldn’t be approaching us,” said the official.
He asserted that the situation is getting better, particularly since the Federal Government began supplying crude to the facility.
An official at the facility showed one of our correspondents that some marketers were loading their trucks with the product directly from the plant, bypassing NNPC.
According to the source, several of the trucks you observed there today belonged to marketers who were buying directly from Dangote without going through NNPC. This indicates that direct sales have begun.
The official stated that, in response to the high petrol demand in Nigeria and other countries, the refinery prioritized producing 53 percent of PMS from its crude oil supplies.
“The situation may be reassessed in the future if the demand for other finished products surpasses that of petrol. Currently, however, approximately 53 percent of our crude is allocated to petrol production, with the rest dedicated to other products,” stated the official.
When questioned about whether marketers had begun purchasing petrol directly from Dangote instead of through NNPC, a prominent major marketer in the country confirmed that they had.
“Yes, everyone is involved in the process. It was indicated that this would happen soon and it’s a standard business transaction,” the source mentioned.
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However, this contradicts claims from certain sources that the refinery cannot sell petrol to marketers unless its agreement with the NNPC is ended.
The PUNCH notes that the company initially stated NNPC would be the exclusive off-taker of its petrol starting from September 15.
A source at the refinery stated that this decision was made by the Federal Government. He expressed surprise when on October 11, the Technical Subcommittee on Domestic Sale of Crude Oil in Local Currency declared that marketers are now required to procure petrol directly from the refinery.
“The Minister of Finance, Wale Edun, who leads the committee, announced that petroleum product marketers can now buy PMS directly from local refineries without involving NNPC as an intermediary. Marketers are encouraged to negotiate and finalize purchases on mutual commercial terms with these refineries, fostering competition and enhancing market efficiency.”
Following the committee’s announcement, operators stated that the market had been completely deregulated and they would now contact the refinery to apply for PMS lifting.
The PUNCH notes that Hammed Fashola, Vice President of the Independent Petroleum Marketers Association of Nigeria, recently headed a delegation from the association to meet with Devakumar Edwin, Vice President of Dangote Industries, in Lagos.
Although Fashola didn’t provide many updates about the meeting with Edwin, he expressed his gratitude for the roles Edwin had been playing.
“Edwin welcomed us warmly and assured that he would facilitate a smoother business relationship between IPMAN and Dangote,” he stated.
Fashola stated, “We had a productive meeting with the group and have begun talks about modalities and logistics. IPMAN has consented to collaborate with Dangote, and we anticipate initiating product lifting from the facility shortly.”
However, IPMAN stated it could not begin the immediate off-take of the product unless the refinery terminated its contract with NNPC.
However, officials at the refinery mentioned that they were now selling PMS to certain marketers.
When the Dangote refinery commenced PMS sales on September 15, the NNPC stated that it purchased the product at a rate of N898 per litre. The refinery dismissed this claim as misleading.
The refinery stated that the naira-for-crude committee would be responsible for announcing the price of its PMS, but as of October 22, the committee has not yet made an announcement.
