The refinery says Nigerian crude oil more expensive than Brent crude
Dangote Petroleum Refinery has explained why it increased its ex-depot price of Premium Motor Spirit (PMS), also known as petrol by ₦100 recently.
The refinery had earlier in the week raised its ex-deport price of petrol from ₦774 to ₦874 per litre following the surge in crude oil prices in the international market amid uprising in the Middle East.
The petrol price increase by Dangote Refinery has generated reactions from different quarters, with some criticising the company for doing so even when it is getting crude oil supply in naira under the Naira-for-crude deal.
However, in a statement released on Thursday, March 5, the $20 billion refinery described the ₦100 increment as a “measured adjustment” done in response to the sudden jump in global crude oil prices.
It said the ongoing crisis in the Middle East caused by a joint military attack launched by the United States and Israel on Iran, has led to disruption of crude oil supply. The situation has forced some refineries to shut down, leading to a cut in refinery production and global scarcity of petroleum products.
“The conflict has driven global crude and freight prices sharply higher, with benchmark Brent prices rising by about 26% within a short period to above $84.0 per barrel,” the refinery stated.
“In response, the refinery implemented a measured adjustment of ₦100 per litre in its ex-depot price of Premium Motor Spirit, representing an increase of about 12%.”
The statement said that even with the price adjustment, the refinery has absorbed 20 per cent of the cost escalation, for now, to cushion the domestic market.
READ ALSO:
- Middle East Tensions: Concerns as Fuel Prices Rise in Nigeria After Oil Price Surge
- Dangote Refinery Assures 65m Litres Petrol Supply Daily, via Depot Owners, Major Marketers
- Crude Oil Nears $80 as Middle East Conflict Escalates
The 650,000 barrels per day capacity refinery said this is despite continuing to source crude oil at prevailing international market prices, whether purchased locally or from foreign suppliers.
Nigerian Crude Oil more Expensive than Brent Crude
Dangote Refinery pointed out that Nigerian crude oil is more expensive than foreign crude grades, such as the Brent benchmark price by $3 to $6 per barrel.
It explained that after adding freight cost of $3.50 per barrel, crude oil will be landing in its tanks between $88 and $91 per barrel. The refinery clarified that it was buying crude oil at about $68 per barrel when its ex-depot price was ₦774 per litre.
On the domestic supply of crude oil, the world-largest single-train refinery stated that it has been receiving only about five cargoes per month from the NNPC, falling short of the 13 cargoes which it requires to support sales into Nigeria. It said while the five cargoes received from NNPC were paid for in naira, they are however priced at international market prices + Premium.
The company said the situation forces it to source foreign exchange to purchase additional crude cargoes from local and international traders to make up the shortfall.
“The high crude cost is compounded by the fact that Nigeria upstream producers have failed to supply crude oil to the refinery as required under the PIA, forcing us to source a substantial portion through international traders who charge an additional premium,” the refinery lamented.
“As a private enterprise operating in a deregulated environment, Dangote Petroleum Refinery has remained responsive and has made significant sacrifices by aligning pricing with market realities to ensure sustainability, particularly as it sources all its crude at prevailing international market prices, whether locally or from foreign suppliers. Selling below cost would undermine its ability to procure crude, sustain production and guarantee uninterrupted supply to Nigerians,” it added.
The refinery stressed that despite the challenges, local refining at the scale it is operating, helps to reduce exposure to international supply disruptions, moderate foreign exchange demand and protect the country from severe shortages during periods of global instability.
The refinery reaffirmed its commitment to stabilising petroleum prices and boosting the drive for national energy sufficiency in the country.
The company reiterated its push to accelerate deployment of Compressed Natural Gas-powered trucks to cushion the impact of global shocks, enhance nationwide distribution efficiency, reduce logistics costs and improve delivery timelines across the downstream sector.
It said the full rollout of CNG-powered trucks for fuel distribution is scheduled to commence this month.
“We remain committed to transparency, operational excellence and the long-term objective of securing sustainable energy security and stability for Nigeria at an affordable cost,” the statement added.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in mass communication.
