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“There is a lot of confusion in the industry. Even the Dangote refinery, the actual volume of PMS that comes...”

Nigeria's Fuel Crisis: IPMAN, NNPCL, and Dangote Refinery engage in crucial talks to address supply shortages and pricing issues.

The Dangote Petroleum Refinery, despite its $20 billion investment, is currently failing to meet Nigeria's domestic demand for Premium Motor Spirit (PMS), also known as petrol. Oil marketers have raised concerns that the refinery's daily production of approximately 10 million litres falls significantly short of the initially promised 25 million litres.

To bridge this supply gap, marketers have resolved to import additional petrol. This decision was announced on Tuesday, highlighting the refinery's inability to meet national demand. The marketers have found an ally in the Trade Union Congress (TUC), which has joined their call for increased production at the Lekki-based facility.

The shortfall in local production has sparked worries about the country's reliance on imports to meet its petroleum needs. Industry stakeholders are urging the Dangote Refinery to ramp up production to its projected capacity, ensuring Nigeria's energy security and reducing dependence on foreign imports.

The Dangote Refinery began supplying Premium Motor Spirit (PMS) to domestic marketers on September 15, but with a lower volume than expected. The Nigerian National Petroleum Company Limited (NNPCL) reported that it would load 16.8 million litres of petrol from the refinery, falling short of the initially announced 25 million litres per day. This discrepancy has raised concerns about the refinery's capacity to meet Nigeria's energy demands.

Prior to the refinery's commencement of supply, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) stated on September 3, 2024, that the refinery was expected to supply 25 million litres of petrol daily, with plans to increase production to 30 million litres. The NMDPRA also met with NNPC to discuss local crude supply to the refinery, aiming to optimize production.

The Dangote Refinery is a 650,000 barrels per day (BPD) integrated refinery project, expected to be Africa's largest oil refinery and the world's biggest single-train facility. Once fully operational, it aims to meet 100% of Nigeria's refined products requirements and have a surplus for export.

Major Highlights:

Initial Supply: 16.8 million litres of petrol per day

Projected Supply: 25-30 million litres per day

Refinery Capacity: 650,000 barrels per day (BPD)

Meeting National Demand: Expected to meet 100% of Nigeria's refined products requirements

“At the NMDPRA headquarters in Abuja, NNPCL reached an agreement to commence crude oil sale and supply to Dangote refinery in local currency.

“The refinery is now poised to supply an initial 25 million litres of PMS into the domestic market this September. And will subsequently increase this amount to 30 million litres daily from October 2024,” the NMDPRA stated on its X page at the time.

Oil marketers revealed on Tuesday, October 15, that the Dangote refinery is falling short of its promised production volume. This setback has prompted marketers and the Trade Union Congress (TUC) to urge the facility to ramp up production.

Festus Osifo, TUC National President, emphasized in Abuja that if Dangote refinery can't meet daily petrol demands, the Nigerian National Petroleum Company Limited (NNPCL) should explore alternative sources for refined petrol.

“If it (petrol) is not available, it is a problem. If, for example, the production from Dangote Refinery is less than 15 million litres per day, it is not sufficient.

“So, while efforts are being made to ramp up production from Dangote refinery, what we are demanding is that we should look for every other means as we are ramping up production, we should source for that difference and bring it in for a while until Dangote can get to that level where the production is sufficient to get to all nooks and crannies of Nigeria.

“For us, that is key because it will address the issue of availability,” the TUC boss stated.

Nigeria's daily petrol demand of approximately 40 million litres far exceeds Dangote Refinery's current production of around 10 million litres, according to a prominent oil marketer and latest consumption data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The significant shortfall between Dangote Refinery's daily petrol output (10 million litres) and Nigeria's daily consumption requirements (40 million litres), as reported by NMDPRA, raises concerns about meeting national energy demands.

“There is a lot of confusion in the industry. Even the Dangote refinery, the actual volume of PMS that comes out from there right now is not up to what it claims to be producing,” a major oil marketer, said.

“I reliably confirmed that they are not refining up to 10 million litres of petrol daily. And even for AGO (diesel), they don't have enough volumes. We are in confusion right now in the downstream oil sector.

“And it may shock you to know that NNPCL does not have any vessel now that is coming, which could be used to augment what Dangote is producing. As we speak now, I don't think they have vessels coming into the country with products. And this is because of the Dangote refinery but the refinery is not producing enough.”

The oil marketer noted that if petrol prices were lower, nationwide fuel queues would likely have already formed due to the significant supply shortfall.

“We would have started seeing chaotic queues across the country but because the price of petrol and diesel is now so high, many people have decided to park their vehicles. The consumption has dropped drastically.

“The traffic situation on our roads reveals all this. The roads are now freer than they used to be in the past when petrol was subsidized. This is because the purchasing power is not there anymore. People now consider the cost of moving from one point to the other,” the source stated.

IPMAN's National Vice President, Hammed Fashola, revealed plans for the association to commence importing Premium Motor Spirit (PMS) soon.

To facilitate this, IPMAN has acquired two tank farms, one in Calabar and another in Lagos, Fashola disclosed.

“We have acquired a tank farm in Calabar and another one in Lagos. We are positioning ourselves for the new era. We will not disclose the capacity of the tank farms now.

“We are free to start importation. With the new development, we are going to get our import licence soon, even as we are going to get a licence to buy from Dangote. So, it's good to have two or three places to source your products from," he said.

IPMAN's Hammed Fashola explained the association's petrol import plans, saying, “Once there is full deregulation, everybody's free to bring in their products. And if the government doesn't allow that, we will come back to square one.” This stance underscores the industry's desire for deregulation.

“Monopoly will set in, which is not too good for Nigerians. You must have an alternative in life. When you don't have an alternative, everything stands still.”

Fashola emphasized that the global crude oil price is standardized, impacting the competitiveness of imported and locally-produced petrol.

“These locally produced petroleum products you are talking about, don't forget that even the price of crude oil is still priced at the international rate. Don't forget about that. So, we will look at it and the exchange rate, those are the two factors that determine the price. So, it depends,” he noted, adding that IPMAN had started working on the import license with the NMDPRA.

Another prominent marketer disclosed that, contrary to expectations, no oil marketer has started directly purchasing Premium Motor Spirit (PMS) from the Dangote refinery.

“Up till now, no marketer has lifted any PMS from Dangote. The major marketers are only lifting NNPCL's allocation, just like when NNPCL imports the product and distributes it to them.

“That is the same way NNPCL allocated its product from Dangote to the major marketers. Even some members of IPMAN did off-take the product from NNPCL,” the dealer stated.

Approximately 335 trucks owned by independent oil dealers have begun loading petroleum products from the Nigerian National Petroleum Company Limited (NNPCL), according to Chinedu Ukadike, IPMAN's National Publicity Secretary.

On Tuesday, October 15, Ukadike announced that independent marketers' trucks started loading petrol after NNPCL opened its product request portal.

“Yes, we have started loading, NNPCL has released our portal and we have turned in our request but we are buying at N998 per litre. In Port Harcourt, we were asked to pay N1,040 per litre,” he stated.

IPMAN's National Vice President, Hammed Fashola, revealed that following the Department of State Services' intervention, NNPCL agreed to supply petrol to IPMAN members at a rate of N995 per liter. This development is a significant outcome of the DSS's mediation efforts, resolving the dispute between the two parties.

In essence, the agreement allows IPMAN members to purchase petrol at a fixed price, ensuring a stable supply chain and potentially impacting the retail prices of petroleum products across the country. The DSS's intervention played a crucial role in brokering this deal, addressing the concerns of both IPMAN and NNPCL.

“For now, tentatively, I think they are offering us N995/litre,” Fashola had said.

 Agreement Details:

• Price per Liter: N995
• Parties Involved: NNPCL and IPMAN
• Facilitator: Department of State Services (DSS)

Investigations have revealed that oil marketers can load approximately 335 trucks with petrol from the Lagos depot at N995 per litre, translating to a whopping N44.76 million for a single 45,000-litre fuel tanker. To put this into perspective, considering the national oil firm owes N15 billion, about 335 trucks can be loaded, showcasing the financial intricacies within the fuel distribution sector. This calculation highlights the substantial investment required by marketers and the massive volume of products needed to meet market demands.

In a related development, members of the Independent Petroleum Marketers Association of Nigeria (IPMAN) met with Dangote Refinery officials on Tuesday to finalize agreements on petrol pricing and logistics. Although details of the meeting remain scarce, sources indicate that discussions will resume on Thursday. This meeting is pivotal in streamlining petrol distribution, enhancing the stability and efficiency of Nigeria's fuel supply chain. With the government's recent policy shift allowing marketers to purchase petrol directly from local refineries, bypassing the Nigerian National Petroleum Company (NNPC), the stage is set for increased competition and potentially lower petrol prices.