Dangote Petroleum Refinery & Petrochemicals has indicated its commitment to stabilising energy supply to Nigeria amid recent shocks in the international oil market.
The ongoing conflict in the Middle East has led to the shutdown of some refineries and cuts in refinery production across the world, resulting in a global scarcity of petroleum products. In addition, China has banned the export of gasoline and diesel.
However, Dangote Refinery said Nigeria is insulated from these supply shocks because it is prioritising supply to the domestic market, noting that this represents one of the key benefits of domestic refining.
According to the company, the conflict has driven global crude oil and freight prices sharply higher, with benchmark Brent prices rising by about 26 percent within a short period to over $84 per barrel.
Follow us on WhatsApp | LinkedIn for the latest headlines
In response, the refinery said it implemented a measured adjustment of N100 per litre in its ex-depot price of Premium Motor Spirit, PMS, representing an increase of about 12 percent.
The refinery added that it has absorbed about 20 percent of the cost escalation for now in order to cushion the impact on the domestic market. This, it said, is despite continuing to source crude oil at prevailing international market prices, whether purchased locally or from foreign suppliers.
"It is worth noting that Nigerian crude oil is more expensive than the Brent benchmark price by $3 to $6 per barrel.
"After adding freight of $3.50 per barrel, crude oil will be landing in our tanks between $88 and $91 per barrel. For context, crude oil was landing in our tanks at about $68 per barrel when our ex-depot price was N774 per litre," the company stated.
The refinery further disclosed that while it receives about five cargoes of crude oil per month from the Nigerian National Petroleum Company Limited, NNPC, which it pays for in naira, the volume is significantly below the 13 cargoes required monthly to meet domestic demand.
It explained that the cargoes supplied by NNPC are also priced at international market rates plus a premium.
Consequently, the refinery said it is forced to procure foreign exchange at open market rates to pay for crude cargoes sourced from both local and international traders.
According to the company, the situation is worsened by the failure of some upstream producers to supply crude oil to the refinery as required under the Petroleum Industry Act, PIA, forcing it to source a substantial portion of its crude through international traders who charge additional premiums.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
