Real reason NNPC is struggling to supply crude to Dangote Refinery — PENGASSAN

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has shed light on the difficulties faced by the Nigerian National Petroleum Company (NNPC) Limited in supplying crude oil to the Dangote Refinery, owned by business magnate Aliko Dangote.

In an interview with Channels TV on Thursday, PENGASSAN President, Festus Osifo, revealed that the NNPC is struggling to meet supply commitments due to a loan secured by the previous administration, under former President Muhammadu Buhari, which used crude oil as collateral.

“We have very robust insights into what is happening today, into the price war that is going on between the Dangote Refinery as well as the government, represented by NNPC, in this case. And maybe I can share very few of them with us. What clearly happened was that Dangote built his refinery,” Osifo said.

He explained that initial discussions over crude supply had encountered challenges due to the complex nature of the oil and gas industry, which is heavily regulated.

Osifo added, “What those companies (IOCs) said is if Dangote Refinery wants them to supply them immediately, it should pay some premium. So the issue of premium was what led to the initial conversation around the Dangote Refinery and the allegation that they were not supplying the refinery crude. This is because most of these companies were asking for premium.”

Further detailing the challenges, he said, “Coming to the part of NNPC and we should get this clearly. NNPC also has its own crude. Some years ago, the Buhari government, they went to Afrexim. They borrowed money. And this money that they borrowed, some of these crudes were tied to pay back this money. So, literally, what Dangote should have done is that you should have started discussing crude supply, five years ago. You don’t start discussing crude supply six months into production.”

Osifo also highlighted the disparity between the prices at which the NNPC buys fuel and sells it to independent marketers, which has further complicated direct fuel purchases from Dangote’s refinery.

He said that while the NNPC may acquire Premium Motor Spirit (PMS) at around N950 per litre and sell to independent marketers at N700 per litre, this pricing policy keeps the cost lower for the final consumers. However, if major marketers buy fuel directly from the Dangote Refinery at a similar price to the NNPC’s purchase price, they may have to sell it at over N1,000 per litre.

“Independent marketers prefer to purchase from NNPCL to take advantage of the lower prices,” Osifo noted.