After years of relying heavily on the importation of petroleum products, the Nigerian National Petroleum Company Limited (NNPC) has announced a significant shift in its operational strategy.
Gatekeepers News reports that on Monday, the company revealed that it has successfully transitioned to sourcing its petroleum needs from the Dangote Petroleum Refinery, which has the capacity to process 650,000 barrels of crude oil per day and is located in Lagos.
This development is projected to save Nigeria approximately $10 billion in foreign currency annually, enhancing the country’s economic stability.
Mele Kyari, the Group Chief Executive Officer of NNPC, made this announcement during his keynote address at the 42nd annual international conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) held in Lagos.
Also, the Independent Petroleum Marketers Association of Nigeria (IPMAN) announced a new agreement that allows its members to purchase petroleum products directly from the Dangote Refinery. This marks a significant change from the previous arrangement, where independent marketers were required to buy from NNPC, a situation they had actively contested.
Under the framework established by the Domestic Crude Oil Obligation (DCOO) outlined in the Petroleum Industry Act (PIA) of 2021, Kyari emphasised that all oil producers in Nigeria will be mandated to supply crude oil to NNPC’s four refineries once they resume operations. He dismissed any notions that NNPC was hindering local refining by withholding crude supplies from them.
Kyari highlighted NNPC’s role as a part owner of the Dangote Refinery, viewing it as an opportunity to secure a market for at least 300,000 barrels per day of its production. This strategic move is aimed at positioning NNPC favorably in the evolving market dynamics surrounding 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.
Kyari explained: “And for those of us in the upstream, don’t forget that we have domestic crude oil supply obligation. It is not NNPC-only obligation. You must understand this. But the DCOO doesn’t mean a loss in value. It says sell it at market price, at commercial value.
“It also serves the best interest of the businesses here, it also shows commitment beyond the talk. So, let’s all not forget that everyone in the industry contributes to this.
“Which means, and to be very practical, when NNPC refineries start working, we will come to you and tell you that you must contribute to supply to these refineries. It’s in the law. It doesn’t have to come from NNPC. And we will make sure we don’t fight with anyone. But if we don’t find our oil, we come to you.”
On ensuring gas delivery to the domestic market, he complained that only NNPC has been left to carry the burden of building the entire gas delivery infrastructure till date, as all the projects were on the balance sheet of NNPC.
He said the company has accepted to carry the burden to guarantee energy security for the country as mandated by the PIA.
In promotion of the Compressed Natural Gas (CNG) penetration in the country, Kyari confirmed that by the first quarter of 2025, at least 12 mother CNG stations will be available in the country.
In addition, he revealed that the company was building a mini Liquefied Natural Gas (LNG) plant in an unspecified location in the country to deliver gas into the market.
The facilities, he stated, will also sustain the growth of CNG delivery to the domestic market and equally make gas available to mid power plants and gas-based industries in the short term.
