Crude Prices to Determine Cost of Dangote Petrol, Say Industry Leaders

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As Premium Motor Spirit (PMS), also known as petrol, from the Dangote Petrochemical Refinery enters the Nigerian market in two to three weeks, petroleum marketers warn that its price may be higher than anticipated due to the cost of imported crude.

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The 650,000-barrel-capacity refinery has struggled to secure local feedstock from international oil companies (IOCs), forcing it to import crude from the United States and other countries at a higher cost. This situation has already made its diesel and aviation fuel less attractive to local marketers due to high prices.

Petroleum marketers expressed concerns to The PUNCH on Monday that the cost of importing crude would raise the production cost, potentially increasing the ex-depot price of Dangote’s petrol. Aliko Dangote, Chairman of the Dangote Group, announced that PMS from the refinery would be available in the Nigerian market by the third week of July.

After the removal of fuel subsidies by President Bola Tinubu on May 29, 2023, petrol prices surged from around N200 per litre to over N600 per litre. Many had hoped the Dangote refinery would help reduce these prices. However, stakeholders fear that Dangote’s reliance on imported crude might prevent this.

Hammed Fashola, National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), stated that the inability to secure local crude is a significant challenge for the $20 billion refinery. He urged the Federal Government to assist Dangote in obtaining local crude to alleviate fuel availability and affordability issues.

Fashola also advised Dangote not to monopolize the market if supported by the government, stressing the need for reasonable pricing to avoid driving independent importers out of the market. He hoped the refinery would help close the price gap between major and independent marketers, predicting a more uniform pricing structure once local crude is secured.

While independent marketers are ready to buy fuel from Dangote, Fashola called on the refinery to finalize partnership discussions with IPMAN, emphasizing the importance of working together for mutual benefit.

An official from the Dangote refinery disclosed that Aliko Dangote wanted to inform Nigerians about the difficulties faced in securing local crude, as IOCs have reportedly been frustrating these efforts. The official explained that importing crude at current exchange rates would prevent Dangote from selling below cost price, further emphasizing the need for local crude supply to reduce costs.

The Dangote refinery recently reduced the price of diesel from around N1,600 per litre to N1,000, with the current price at approximately N1,200 per litre. Dangote announced that Nigeria would stop importing fuel once his refinery begins PMS sales in July.

Olufemi Adewole, Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), stated that the price of Dangote petrol would depend on crude acquisition costs, advising against speculation until the refinery sets its prices. DAPPMAN members are ready to buy from the refinery once PMS loading begins.

Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, accused IOCs of deliberately frustrating the refinery’s efforts by inflating local crude prices, forcing the refinery to import from the US, thus increasing production costs. Edwin asserted that IOCs aim to keep Nigeria dependent on imported refined products, benefiting their home countries economically.

Meanwhile, the Dangote refinery is increasing diesel exports to West Africa, gaining market share from European refiners. According to Reuters, the refinery’s diesel exports reached nearly 100,000 barrels per day in May, nearly doubling April’s levels, primarily targeting West African markets.

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