After decades of massive importation of petroleum products, the Nigerian National Petroleum Company Limited (NNPC) yesterday announced that it had finally ended the age-long practice......See Full Story>>.....See Full Story>>
The development is expected to save Nigeria as much as $10 billion in hard currency in-country annually, as the national oil company said it now buys from the 650,000 barrels per day Dangote Petroleum Refinery located in Lagos.
Group Chief Executive Officer of NNPC, Mr. Mele Kyari, disclosed this in Lagos, while delivering his keynote message at the ongoing 42nd annual international conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE).
The announcement came amid another cheery news by the Independent Petroleum Marketers Association of Nigeria (IPMAN) that it had struck a deal to buy products directly from the $20 billion Dangote facility.
The previous arrangement was for the independent marketers to buy from the NNPC and not from the Dangote Refinery, a practice the oil sellers had vehemently opposed.
But drawing strength from the Domestic Crude Oil Obligation (DCOO) as stipulated in the Petroleum Industry Act (PIA) 2021, Kyari also said all the oil producers in the country must supply crude to the four NNPC refineries when they come back on-stream.
He disclaimed assumptions that the national oil company was sabotaging local refineries by refusing to sell crude oil to them.
Kyari profiled NNPC as a proud part owners to the Dangote Refinery, explaining that the company saw an opportunity in the $20 billion refinery as a clear market for at least 300,000 barrels per day of its production, which will enable it to avert being caught in the emerging shrinking market for crude oil.
“Oil is found in very many unexpected locations across the world and people have choices. And therefore, we saw an opportunity to now supply to not just Dangote, but every refinery that operates in the country. So, it’s a well informed business decision. Therefore, from day one, we knew that it was to our benefit to supply crude oil to domestic refineries.
“So, we don’t need to be persuaded. We don’t need anyone to talk to us. There is no need for any pressure from the streets for us to do this. We are already doing this”, Kyari stated.
Highlighting the implications of the pressure for oil producers in Nigeria to supply crude to local refineries and in naira too, Kyari said Nigerian crude is a premium type of crude that attracts premium price
In the global market, he explained that refiners buy Nigerian crude to blend with their dirtier crude to process, adding that only few refineries take Nigerian crude for direct processing because of its expensive and high premium nature.
Kyari disclosed that the NNPC had stopped importing refined petroleum products in line with the company’s support to local processing of all crude produced in the country.
Kyari stated: “And therefore, I believe strongly also that we must process all the crude that we produce in the country up to the optimum. And we will do everything possible to make sure that we domesticate this. And today, NNPC does not import any product. We are taking wholly from the domestic refinery.”
He said the company was also working jointly with the federal government to manage the issue of pricing, which is one of the implications of sourcing all feedstock supply from the domestic market.
He confirmed that substantial work had been done around that, adding that it will no longer be an issue.
He further disclaimed what he described as issues on the streets that the NNPC does not want to sell crude to domestic refineries in naira and that it’s a form of sabotage.
“As a matter of fact, it makes no difference to us because if you sell crude to domestic refinery in naira and you buy product in naira from a domestic refinery, it’s a netzero game. You lose nothing. Otherwise, whatever you do, you still have to source for FX because you have to import,” he added.
Reminding other oil producers in the country that the domestic crude oil obligation applies to both NNPC and them, Kyari told the producers that they must supply crude to the four NNPC refineries when they return to production.
He clarified that selling crude to local refineries in naira didn’t mean losing the value of the product but that the only difference was that the foreign exchange gap will be removed in the process to boost local currency and country’s economy.