NNPC Silent Amid Subsidy Claims and Crude Shortage Probe
Dangote Refinery Eyes Exports as Government Meets Over Disputes
With the landing cost of Premium Motor Spirit (PMS), commonly known as petrol, now at N1,117 per litre, oil marketers projected on Monday that the monthly subsidy for this commodity has surged to approximately N707 billion.
As the Dangote Petroleum Refinery gears up to begin petrol production in August, the company may opt to export its products due to challenges in securing crude oil supplies and other regulatory issues impacting the $21 billion enterprise.
This development followed a meeting in Abuja on Monday between Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), officials from Dangote refinery, the Nigerian National Petroleum Company Limited (NNPC), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). The discussions focused on the ongoing disputes between Dangote refinery and oil sector regulators and operators.
In parallel, the House of Representatives inaugurated a committee to investigate the lack of crude oil for domestic refineries and allegations of price hikes for profit.
Last Wednesday, the Major Energies Marketers Association of Nigeria (MEMAN) reported that the landing cost of petrol was N1,117 per litre. This revelation coincided with the Independent Petroleum Marketers Association of Nigeria (IPMAN) asserting that the Federal Government continues to subsidize PMS, a practice deemed unsustainable and potentially leading to higher pump prices.
MEMAN also disclosed that the landing costs for diesel and aviation fuel were N1,157 per litre and N1,127 per litre, respectively. Despite these high costs, the pump price of petrol remains significantly lower than its landing cost.
Retail outlets operated by NNPC and major marketers sell petrol between N617 and N670 per litre, with the NNPC ex-depot price at N585 per litre. Independent marketers, however, often purchase petrol from private depot owners at higher prices, resulting in pump prices exceeding N700 per litre.
NNPC remains Nigeria’s sole importer of petrol as other dealers face challenges accessing U.S. dollars required for imports. The difference between the N1,117 landing cost and the N585 ex-depot price implies a subsidy of N532 per litre, amounting to an estimated daily subsidy spending of N23.57 billion based on recent consumption figures.
IPMAN’s Secretary for Abuja-Suleja, Mohammed Shuaibu, contended that despite official claims, the substantial subsidy figures presented by MEMAN indicate ongoing subsidization of petrol by the government.
Shuaibu emphasized the need for full deregulation of the downstream sector, arguing that the continued sole importation of petrol by NNPC contradicts claims of market liberalization.
Earlier statements from former Kaduna State Governor Nasir El-Rufai corroborated the reintroduction of fuel subsidies by the government. Despite NNPC’s assertion of subsidy elimination, the Chief Corporate Communications Officer, Olufemi Soneye, did not address the latest subsidy claims.
Given the high landing cost of PMS, experts like Chief Ukadike Chinedu, Public Relations Officer of IPMAN, argue that petrol prices should exceed N900 per litre without subsidies.
#### Dangote Refinery’s Export Plans
As the Dangote refinery prepares to commence petrol production, the company is contemplating exporting its products due to difficulties in obtaining crude oil from International Oil Companies (IOCs) in Nigeria. This situation has increased production costs, making local sales less viable compared to export markets.
Internal sources indicated that the cost of importing crude oil from the U.S. has raised production costs, pushing the refinery to consider exporting its PMS to more profitable markets, such as West Africa.
The refinery has already exported approximately 3.5 billion litres of refined petroleum products, constituting about 90% of its total output. A refinery official, speaking anonymously, suggested that without local crude oil supplies, exporting PMS would be more viable to avoid losses due to high production costs.
Energy expert Prof Wumi Iledare remarked that the Dangote refinery, situated in a free trade zone, could legitimately export its products if the Nigerian market is unwilling to meet the required prices.
The $20 billion Dangote refinery, located in Lekki, Lagos State, is expected to begin selling petrol in August. Despite its goal to end fuel importation and provide affordable energy to Nigerians, the refinery faces significant obstacles, including the reluctance of IOCs to supply crude oil.
#### House of Representatives Investigation
The Speaker of the House of Representatives, Tajudeen Abbas, stressed the importance of ensuring the quality of imported petroleum products meets global standards. Addressing the House joint investigative committee, Abbas emphasized the need for rigorous testing to prevent the importation of substandard products.
The committee, led by Ikenga Ugochinyere, aims to address issues such as fuel queues, high PMS costs, and the disruption of domestic refineries’ feedstock supply. The investigation will include detailed laboratory tests at various facilities and scrutinize the involvement of middlemen in crude trading and the issuance of import licenses.
#### Ministerial Intervention
Minister Heineken Lokpobiri convened a high-level meeting with key stakeholders, including Aliko Dangote, to address the issues affecting the Dangote refinery. The meeting underscored the necessity for cooperation to resolve the challenges and ensure the refinery’s optimal performance.
The meeting marked a significant step towards resolving the current impasse, highlighting the minister’s commitment to fostering a conducive environment for Nigeria’s oil and gas sector.
Punch