Continued importation disrupts fuel supply amid local refineries
26 April 2024 |
4:15 am
Nigeria is still importing about 100 per cent of the needed 50 million litres of premium motor spirit (PMS) five months after the “technical completion” of the Port Harcourt refinery and one year after the commissioning of Dangote Refinery.
A section of the Dangote Refinery in Lagos.
• Naira dips to N1,450 • Black market soars above N1,000/litre in Abuja, Kaduna, others
• Fuel queues, distribution
challenges linger as NNPC assures of product supply
• Two million barrels cargo struggles to deliver U.S. crude to Dangote Refinery
• NNPC, African Refinery sign co-location deal to boost refining capacity
Nigeria is still importing about 100 per cent of the needed 50 million litres of premium motor spirit (PMS) five months after the “technical completion” of the Port Harcourt refinery and one year after the commissioning of Dangote Refinery.
The development is already fueling petrol queues nationwide with many stations already out of stock in Abuja yesterday, as The Guardian gathered ship-related challenges may leave the country in fuel shortage till next week.
This is as the Naira experienced a decline on Thursday afternoon, falling to N1,450 per dollar in the parallel market. This represented a decrease of 8.28 per cent or N120 difference from the N1,330 reported earlier in the morning.
This is according to data culled from currency traders. The Bureau de Change (BDC) operators listed the purchase rate at N1,350 and the approximate selling rate at N1,450, yielding a N100 profit margin. The Central Bank of Nigeria (CBN) is ramping up dollar supplies through the BDCs to minimise pressure on the foreign exchange market and lower imported inflation.
It will be recalled that on April 23, the CBN lowered the foreign exchange rate for dollar distributions to BDCs, offering $10,000 at N1,021 per dollar, which is roughly 21 per cent below the official rate reported by FMDQ. The move was aimed at enhancing liquidity in the unofficial market.
Also, the apex bank has cleared airlines’ outstanding obligations, bolstering confidence in the forex market. These CBN’s initiatives have tempered forex scarcity, aiding the naira’s recovery from an early March rate of N1,617 per dollar to N1,072 per dollar on April 17.
At the official market, the naira depreciated to N1,309.88 against the dollar by the end of Thursday’s trading, from the previous rate of N1,308.52 recorded on Wednesday.
While Nigerians face artificial scarcity of petrol in many parts of the country, recall that before commissioning the Port-Harcourt Refinery in December, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, said in August 2023 at a Ministerial Briefing, hosted by the Presidential Communication Team in Abuja that the country would stop importing petroleum products by end of 2023.
While Kyari last month shifted the importation deadline to the end of this year, the Port Harcourt Refinery, which the national oil company said would resume production in the first quarter, is yet to serve the country, leaving the oil firm to remain the sole importer of PMS amid price control and foreign exchange challenges.
While former President Muhammadu Buhari had rushed to commission Dangote Refinery in May last year before leaving office, the company is yet to commence refining gasoline.
Although the company has been producing Automotive Gas Oil (AGO), popularly known as diesel, and aviation fuel, helping to crash the market price from N1,700 per litre to about N1,000, Dangote Refinery is yet to bring on-stream petrol refining. However, there are reports that the company will by next month begin production of PMS in addition to diesel and aviation fuel.
The Guardian gathered that while Nigeria has vessels carrying PMS on water, the mother vessels are unable to deliver products due to some ship-to-ship transfer challenges.
The development, which could have been a different scenario if the product was refined locally has already left queues across states as motorists face scarcity.
Most stations in Abuja were out of fuel as the few which were dispensing were struggling with long queues. In most of the Northern states, the prices have also peaked beyond the upper bands, even as black marketers smile to the bank in the Federal Capital Territory and Kaduna as they sell a litre for above N1,000.
The Guardian gathered that at the pump in Birnin Kebbi, marketers were selling for N850 per litre while black marketers were selling at N1,300. In Kano, the pump price averages N700 per litre but most stations are shut and the few that manage to open close in about two hours.
In Bauchi, a litre is now trading for about N800 while in Uyo, Anambra and Minna, it is hovering around N750 per litre. For almost a month, a cargo from PetroChina trying to deliver U.S. crude to Dangote Refinery has been hovering on Nigerian water following payment issues. Although Nigeria produces one of the lightest and environmentally friendly crude oil in the world, The Guardian reported that Dangote Refinery will import West Texas Intermediate (WTI) of about seven million barrels between March and this month.
Statistics obtained from the Nigerian Upstream Petroleum Regulatory Authority (NUPRC) showed that 4.9 million barrels of U.S. crude was meant to be delivered at Dangote in March and another two million barrels in April.
Reuters in a report noted that PetroChina has since March 28 tried to deliver to Dangote Refinery without success. The crude is reportedly loaded in two million barrels capacity crude cargo, supertanker Maran Mira.
The report links the delay to payment challenges, especially a letter of credit, which is common for global crude trading even as China is reportedly not willing to get refined products as pay.
The cargo has in the last 29 days incurred a demurrage of about $1.8 million as the daily cost stands at $65,000. This is as another tanker from the company is reportedly heading to the refinery with about two million barrels of crude. Dangote Group chief executive, Edwin Devakumar, told Reuters that seeking favourable sale prices and credit terms were normal business practices.
“If someone gives me one year credit, I’ll grab it and if not, I’ll negotiate the best possible deal. When you go to a shop to buy something … You’ll try the best possible deal and I do the same,” he said.
MEANWHILE, NNPCL has said the challenges leading to fuel scarcity across the country had been resolved.
Reiterating that the prices of petroleum products are not changing, it urged Nigerians to avoid panic buying as there is sufficiency of products in the country.
It noted that the scarcity in certain regions of the country stems from logistical challenges, which have since been resolved. In a statement by Chief Corporate Communications Officer, NNPC Ltd., Olufemi Soneye, emphasised that there were no impending changes to petroleum product prices.
NNPCL also announced it has signed an agreement with African Refinery Port Harcourt (ARPHL) for the subscription of 15 per cent equity in Nigeria’s second-largest private refinery after Dangote Refinery. The agreement was executed by Mr Omotayo Adebajo (Managing Director) on behalf of ARPHL and Mr Adedapo Segun, the NNPC Executive Vice-President, Downstream signed the agreement on behalf of NNPC Ltd.
The 15 per cent Share Subscription Agreement, which was finalised on Thursday at a signing ceremony at the NNPC Towers in Abuja, is a crucial step towards increasing Nigeria’s refining capacity.
Segun said after the signing of the agreement: “African Refinery is one of the partners we have been working with to co-locate in our various refinery assets and they are our partners for the Port Harcourt Refinery.
“The proposed 100kbpd will be co-located with the two existing refineries in the PHRC complex, and it will increase our refining capacity in Port Harcourt from 210kbpd to 310kbpd.”
Tola Ayo-Adeyemi, Group Executive Director Legal, and Regulatory Compliance at African Refinery Group (ARG), stressed the significance of this collaboration, highlighting that the event signals NNPC Ltd’s full commitment to the ARPHL refinery project to be sited on 46 hectares of land within the Port Harcourt Refinery complex, Eleme, in Rivers State.
The project stands as the largest private refinery in Nigeria’s South-South and South-East geo-political regions. He noted: “NNPCL and ARPHL since signing a Project Framework in 2017 have made significant progress, that a groundbreaking ceremony is scheduled for later in the year, and that the estimated project delivery schedule aims for commencement of construction in 2025, and commercial operations by 2027.”
The project will be developed in phases and upon completion, the refinery is anticipated to produce over 30 million litres of various petroleum products daily, including petrol, diesel, jet fuel, LPG, and LPFO. The project is estimated to cost over $2 billion.
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