The Chief Executive Officer of Dangote Petroleum Refinery, David Bird, has raised concerns over inadequate crude oil supply to the refinery under the Federal Government’s crude-for-naira arrangement, revealing that the facility has been compelled to source Nigerian crude from the international market at a premium.
Bird spoke on Arise Television’s Morning Show on Wednesday, where he explained that the refinery is currently receiving significantly fewer cargoes than agreed under the arrangement with the Nigerian National Petroleum Company Limited (NNPCL).
According to him, the refinery was expected to receive between 13 and 15 cargoes of crude oil monthly, volumes he said are required to meet Nigeria’s domestic fuel needs, but the facility is presently getting only about five cargoes.
“We have been very vocal that there’s an existing arrangement in place under the crude-for-naira programme, commonly misunderstood as a pricing regime. It is not,” Bird said.
He explained that the initiative allows the refinery to purchase crude oil in naira while the price remains tied to the international benchmark.
“It is priced at full international benchmark for crude oil pricing, however, without the foreign exchange implications. That has been very successful in stabilising the foreign exchange back in Nigeria and the relationship between NNPC and Dangote. We should be proud of that,” he stated.
Call for transparency in crude allocation
Bird said the refinery’s main concern is the volume and type of crude allocated, noting that the current supply falls short of what was agreed.
“Our demand of the government is that there be transparency in allocation. Under the agreement, we should be getting about 13 to 15 cargos a month, and that’s what we could process to meet the domestic fuel requirement of Nigeria. Currently, we’re only getting five,” he said.
He stressed that the shortfall does not reflect a failure by the refinery to meet its obligations under the programme.
“So that’s not an underperformance against that pre-agreed volume contract,” Bird added.
Issue of crude grade preference
Bird also pointed to difficulties in securing specific crude grades required for the refinery’s operations.
Nigeria produces multiple crude oil grades exported from different terminals, but he explained that the refinery’s processing units were designed to handle certain types of crude.
“Nigeria has a wide variety of crude grades that are exported from different terminals, and we have a preference. Our hardware is designed around certain crude slate. So we submit our preference,” he said.
However, he said the refinery frequently receives crude grades different from those requested.
“Not only do we not get the full allocation, very often we don’t get the grades that we’re highlighting as our preference,” Bird noted.
He urged authorities to improve transparency in the allocation system, particularly as around 30 per cent of Nigeria’s crude output is now earmarked under the crude-for-naira arrangement.
Buying Nigerian crude at premium abroad
Bird disclosed that when the refinery turns to the international market to source crude, it often finds the same Nigerian grades it had requested locally.
“If we go back to the international market, we find the same grade that we preference for that were denied to us now being sold in the international market,” he said.
He explained that strong global demand for crude oil has driven up prices for Nigerian grades, forcing the refinery to pay significantly more.
“We do purchase those and right now there’s obviously the global thirst for crude no matter where it comes from, and that has a significant premium being attached to Nigerian crude grades,” he said.
According to him, the refinery is currently paying about $18 per barrel premium to secure these Nigerian crude grades in the international market.
“We’re paying $18 per barrel premium for those same Nigerian crude grades,” Bird said.
He described the situation as unfortunate, noting that the additional value ends up benefiting international traders instead of Nigeria.
“It is disappointing that it is coming back to us in the open market, and that value between the purchase price and the premium that we’re now seeing is money that Nigeria is leaking to the international trading community. And that’s unnecessary,” he said.
Crude-for-naira not a subsidy
Bird also dismissed claims that the crude-for-naira arrangement amounts to a subsidy for Dangote Refinery.
“There’s a misunderstanding of the crude-for-naira programme to mean some kind of subsidy. It is not,” he said.
He explained that the refinery pays the full global benchmark price for crude oil and bears all associated costs including shipping and insurance.
“We purchase the crude, we transport the crude and we insure that crude as if we’re in the international benchmark, and every one of that cost is impacted by this crisis,” he said, referring to global geopolitical tensions that have increased freight and logistics costs.
Refinery sourcing crude globally
Despite the challenges, Bird said the refinery has been able to maintain operations due to its ability to process different types of crude oil from across the world.
He explained that the facility regularly imports crude from the international market to supplement domestic supply.
“With the strength of the Dangote Refinery and with all of the input infrastructure, all of that crude and feedstock that is seaborne, that means we’re also bringing international crude,” he said.
According to him, between 30 and 40 per cent of the refinery’s crude supply currently comes from global markets.
Bird said this reflects the strategic foresight behind the refinery’s design.
“That is testimony to the investment and the foresight that Alhaji Aliko Dangote had. He built an asset that is very versatile, very flexible and able to process a wide variety of crude,” he said.
Flexibility keeps refinery running
He noted that the refinery’s flexibility has become a critical advantage during the current supply challenges.
“This month in time, we’re showcasing the benefits of that flexibility such that we don’t have to rely on a single supply source,” Bird said.
He added that many refineries around the world are built to process only specific crude types, making them less adaptable.
“The same can’t be said of some refineries that process only the Middle Eastern grades. So we should be very proud here in Nigeria that we have Dangote Refinery that has the flexibility to process a wide variety of its feedstocks,” he said.
The Dangote Refinery, located in the Lekki Free Zone in Lagos, has a refining capacity of 650,000 barrels per day, making it the largest refinery in Africa and a major component of Nigeria’s efforts to reduce dependence on imported petroleum products.
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