ICYMI: Dangote refinery: Crude supply crisis threatens oil investments, operators warn FG

The domestic crude oil supply crisis that recently led to accusations and denials in the oil sector may warrant an investment plunge in the industry, operators declared on Wednesday.

According to operators at the Lagos Chamber of Commerce and Industry, the crisis may damage the confidence of International Oil Companies and investors in refineries.

This came as a section of the 650,000-capacity Dangote Petroleum Refinery caught fire on Wednesday, sparking reactions on social media as videos of the incident went viral.

The management of the facility, however, allayed fears about the incident, as it stated that the situation had been put under control, adding that no one was harmed by the fire outbreak.

Meanwhile, the LCCI charged the Federal Government to prevent any form of blackmail and victimisation of IOCs and local refiners by quickly resolving the issues around oil supply contracts, higher crude cost in Nigeria above international prices, and the cost of logistics.

The Director-General, LCCI, Chinyere Almona, disclosed this while responding to enquiries by our correspondent on the views of IOCs concerning the recent accusations against them by a senior official of the Dangote Petroleum Refinery.

IOCs operating in Nigeria such as Shell, ExxonMobil, TotalEnergies, and Nigeria Agip Oil Company, among others, are under the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry.

This came as modular refinery operators demanded the intervention of the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, in the lingering domestic crude oil supply crisis.

“Since the issue around crude supply to the Dangote refinery and the IOCs, the chamber has consulted with some relevant parties. While these consultations continue, we call on the government, as the regulator, to provide a detailed report on what the key issues are and what it intends to do to resolve these issues.

“This is critical as uncertainties like this can be a disincentive to potential investors in the oil and gas sector. The regulatory agency (NUPRC) must show the capacity to resolve issues about protecting investors’ interests. The investors here are the Dangote refinery and the IOCs,” Almona stated.

Modular refiners are, of course, investors in the midstream arm of the oil and gas sector, as the LCCI DG had earlier told our correspondent that the chamber had championed calls for the provision of crude to operators in this space.

Continuing in her response on Wednesday to the recent crude supply concerns between IOCs and the Dangote refinery, she added, “Crude oil is an international commodity traded on open trade terms in the global markets.

“Still, we can resolve these issues to prevent any form of blackmail and victimisation of any party. The issues around supply contracts, higher prices above international crude prices, and the cost of logistics should be quickly resolved before they damage the confidence of investors in the sector.”

Also, the National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said the battling with crude oil locally to boost production by Dangote Refineries would dampen investors’ confidence if it lingered.

He said, “This development will affect negatively. Our crude oil is being used in other countries, I am concerned about the situation where we export crude oil to other countries, yet we import refined products.

“It doesn’t make sense. Why can’t our refineries process the crude oil we produce? Instead, we’re exporting it to other nations, only to import refined products from them.

“It’s suspicious and seems like a game is being played. I hope this isn’t another case of inefficiency or lack of capacity. We need to get our refineries working to process our crude oil and reduce our reliance on imported refined products. We must address this issue, if we continue in this course, we can dampen investors’ confidence.”

IOCs urged

It was reported on Monday that the Vice President of Oil and Gas at Dangote Industries Limited, Devakumar Edwin, had accused International Oil Companies in Nigeria of plans to frustrate the survival of the new Dangote Petroleum Refinery.

Edwin had said the IOCs were deliberately and willfully frustrating the refinery’s efforts to buy local crude by hiking the cost above the market price, thereby forcing the refinery to import crude from countries as far as the United States, with its attendant high costs.

“Recall that the NUPRC recently met with crude oil producers as well as refineries owners in Nigeria, in a bid to ensure full adherence to Domestic Crude Oil Supply Obligations as enunciated under section 109(2) of the Petroleum Industry Act.

“It seems that the IOCs’ objective is to ensure that our petroleum refinery fails. It is either they are deliberately asking for a ridiculous/humongous premium or they simply state that crude is not available. At some point, we paid $6 over and above the market price. This has forced us to reduce our output as well as import crude from countries as far as the US, increasing our cost of production. It appears that the objective of the IOCs is to ensure that Nigeria remains a country which exports crude oil and imports refined petroleum products. They (IOCs) are keen on exporting the raw materials to their home countries, creating employment and wealth for their countries, adding to their Gross Domestic Product, and dumping the expensive refined products into Nigeria – thus making us to be dependent on imported products. It is the same strategy the multinationals have been adopting in every commodity, making Nigeria and Sub-Saharan Africa to be facing unemployment and poverty, while they create wealth for themselves at our expense.

“This is exploitation – pure and simple. Unfortunately, the country is also playing into their hands by continuing to issue import licences at the expense of our economy and at the cost of the health of the Nigerians who are exposed to carcinogenic products,” the Dangote refinery official had stated.

Edwin had also accused the Nigerian Midstream and Downstream Petroleum Regulatory Authority of granting licences indiscriminately to oil marketers to import dirty refined products into the country.

He had stated that even though Dangote was producing and bringing diesel into the market, complying with the regulations of the Economic Community of West African States, “licences are being issued, in large quantities, to traders who are buying the extremely high sulphur diesel from Russia and dumping it in the Nigerian market.”

But the Federal Government, on Tuesday, denied this claim, as it declared that there was no importation of dirty fuel into Nigeria, countering the position of the official Dangote refinery official.

The government declared this after meeting with oil marketers and local refiners of crude oil in Abuja, where parties at the meeting discussed issues pertaining refined products’ pricing, issues of competition and the importation of products that are produced in Nigeria.

The government spoke through the Nigerian Midstream and Downstream Petroleum Regulatory Authority, as it explained that refined petroleum products with high-sulphur contents were last imported in February, and that this had since been addressed by the regulator.