AGS NEWS – Dangote Industries Ltd. has praised the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for its efforts in addressing the company’s crude supply requests from International Oil Companies (IOCs).

In a statement on Wednesday in Lagos, Mr. Devakumar Edwin, Vice President of Dangote Industries, commended the commission for its transparency measures, specifically the publication of the Domestic Crude Supply Obligation (DCSO) guidelines.

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Edwin noted that if these guidelines are properly implemented, they will allow direct dealings with Nigerian crude producers as outlined by the Petroleum Industry Act (PIA).

Edwin criticized IOCs in Nigeria for frequently obstructing the company’s efforts to acquire locally produced crude for its refinery. He explained that when crude was offered, it often came at a premium of $2 to $4 per barrel above the official price set by NUPRC.

For example, in April, Dangote Industries paid $96.23 per barrel for Bonga crude, which included various premiums. In comparison, they bought West Texas Intermediate (WTI) crude with a much lower trader premium.

When the Nigerian National Petroleum Corporation (NNPC) adjusted its premium based on market feedback, some traders demanded an even higher premium for Bonny Light crude.

Edwin called on NUPRC to address these pricing issues, stating that the prices offered were significantly higher than market rates tracked by platforms like Platts and Argus.

These comments followed a statement by NUPRC CEO, Gbenga Komolafe, who, in an interview, described claims of IOCs withholding crude from domestic refiners as “erroneous.” Komolafe emphasized a willing buyer-willing seller relationship as stipulated by the PIA.

However, Edwin clarified that despite NUPRC’s support, IOCs have been challenging to deal with directly.

Apart from NNPC, Dangote Industries has only managed to purchase crude directly from one other local producer, Sapetro, with other producers directing them to international trading arms.

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Edwin recounted a situation where an IOC’s trading arm refused direct sales to Dangote Refinery, opting for a middleman instead. The issue was resolved after nine months of negotiation, aided by NUPRC.

Edwin urged NUPRC to revisit pricing policies, highlighting the importance of market liquidity for a willing seller-willing buyer system.

He suggested specifying volume obligations per producer and establishing a transparent pricing formula to prevent price gouging, noting that gaps in the PIA’s domestic crude supply obligation should not hinder practical solutions.