NNPCL Drops Fuel Imports for Dangote Refinery

NNPCL Shifts to Local Fuel Supply, Partners Dangote Refinery

“It will happen, It's already happening. Oil is found, as you know, in many unexpected locations across the...”

Nigeria Ends Fuel Importation: NNPC Partners with Dangote Refinery to Boost Local Production & Save N2 Trillion Monthly

NNPCL's Group Chief Executive Officer, Mele Kyari, announced on November 11 that the company will stop importing fuel and instead buy directly from Dangote Refinery. This game-changing move was revealed at the Nigerian Association of Petroleum Explorationists (NAPE) conference in Lagos, which focused on resolving Nigeria's energy trilemma: energy security, sustainable growth, and affordability.

The Reason Behind the Shift

This decision comes at a critical time, as some petroleum marketers were planning to import fuel and potentially sell it at lower prices than Dangote Refinery's $20 billion operations. This would have undercut the local refinery's efforts to provide affordable fuel.

The Cost of Fuel Imports

President Bola Tinubu recently highlighted the staggering cost of Nigeria's fuel imports - approximately N2 trillion per month, revealed in August. By stopping fuel imports, NNPCL aims to reduce this financial burden and promote local energy production.

What This Means for Nigeria

NNPCL's shift to local fuel sourcing is a significant step towards energy security and sustainable growth. It's a bold move to reduce dependence on imports and boost Nigeria's economy. With Dangote Refinery on board, the country can look forward to more affordable and reliable energy solutions.

Nigeria is making significant strides in its energy landscape. President Bola Ahmed Tinubu recently emphasized the potential of compressed natural gas (CNG) to save Nigeria over N2 trillion monthly, which can then be channeled into vital sectors like healthcare, education, and other essential investments.

Nigeria, despite being a major oil producer, has historically relied on fuel imports due to its limited refining capacity. However, this narrative is changing. Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), announced at the Nigerian Association of Petroleum Explorationists (NAPE) conference that NNPCL has halted all fuel imports and is now sourcing supplies exclusively from local refineries, including the Dangote Petroleum Refinery. This bold move marks a significant shift towards energy self-sufficiency and reduced dependence on foreign imports.

Implications of NNPCL's Decision:

End of N24 trillion Fuel Import Dependency: NNPCL's move is expected to save Nigeria a substantial amount annually.

Boost to Local Refineries: Local refineries, such as Dangote Petroleum Refinery, will benefit from increased demand and production.

Economic Growth: The saved funds can be redirected to critical sectors, driving economic growth and development.

This development underscores Nigeria's commitment to leveraging its natural resources for domestic growth and development.

“Today, NNPC(L) does not import any product, we are taking only from domestic refineries,” he revealed.

NNPCL's Group Chief Executive Officer, Mele Kyari, has cleared the air on allegations that the company is undermining the Dangote Refinery's efforts. Initially, NNPCL was the sole off-taker of petrol from the refinery, but the Federal Government recently opened up the market, allowing other marketers to source fuel directly from the facility.

Kyari vehemently denied claims that NNPCL was hindering domestic refining efforts, stating that media reports suggesting opposition to local refineries were entirely unfounded. This clarification comes amid concerns that NNPCL's actions might thwart Nigeria's goal of achieving self-sufficiency in refining crude oil.

The Controversy Surrounding NNPCL's Actions

Accusations of Undermining Local Refineries: Youth leaders have accused NNPCL of perpetuating the decline of indigenous refineries, hindering Nigeria's self-sufficiency in refining crude oil.

Non-Compliance with FG's Directive: Dangote Petroleum Refinery and other domestic refineries have accused NNPCL of not complying with the Federal government's directive to sell crude to them in Naira.

Impact on Fuel Prices: NNPCL's stance has reportedly dashed Nigerians' hopes of reduced fuel pump prices, despite the full operation of the Dangote refinery and utilization of the nation's moribund refineries.

“The point is very far from it and I'm going to speak to it straight. We are very proud part-owners of Dangote refinery, no doubt about it. We saw an opportunity that there is a clear market for at least 300,000 barrels of our production; we know that as time moves on, people will start struggling to find markets for their production.

“It will happen, It's already happening. Oil is found, as you know, in many unexpected locations across the world and people have choices. Therefore we saw an opportunity to log supply to the domestic refinery, not just Dangote but any other refinery that operates in the country, so it was a very informed business decision.

“Therefore, from day one, we knew that it is to our benefit to supply crude oil to the domestic refinery, 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,” he clarified.

Mele Kyari, the Group CEO of NNPC Limited, has a compelling argument for Nigeria's oil refining conundrum. He refers to Nigerian crude as “Lamborghini crude” due to its exceptionally high quality, which commands a premium price. However, this premium status comes with a downside - many refineries find it too expensive to process, opting instead for cheaper, lower-grade alternatives.

The Challenges of Refining Nigerian Crude

High-Quality Crude: Nigerian crude is renowned for its exceptional quality, making it highly sought after by international traders.

Premium Price: This high quality comes at a cost, making Nigerian crude more expensive than other options.

Refinery Preferences: Many refineries choose cheaper alternatives, despite Nigerian crude's superior quality.

Kyari also highlighted another issue - some international traders buy Nigerian crude only to blend it with lower-grade fuels, compromising its quality to reduce costs. This practice undermines the value of Nigeria's premium crude.

The Way Forward 

To fully leverage Nigeria's oil resources, domestic refining capacity must be developed to handle the high-quality crude. The Dangote Refinery, for instance, is expected to receive 300,000 barrels daily from NNPC Limited. By refining Nigerian crude domestically, the country can maximize its oil revenues and reduce dependence on international markets.

He said, “We should never forget that Nigerian crude is 'Lamborghini crude', if we choose that every product that we have in this country must come from domestic production, then we must deal with pricing. Otherwise, out there in the global market, everybody buys Nigerian crude and blends it with dirtier crude to process, a lot of you will confirm this. So, no one takes Nigerian crude except one or two refineries that I know. Straight processing of Nigerian crude, nobody does this, because you do have a gap in value if you do this.

“Therefore, as a country, and I believe this strongly also, that we must process all the crude that we produce in the country to the optimum. You can do intermediate products and sell to the market, you are still adding value. You don't have to sell gasoline that is coming from Nigerian production.

“You can do something different so you can process it domestically, but it's going to be high quality. As we all know and it's very clear in the media that we are selling high-quality products, that's very true but you need not do this. You are driving a Keke-Napep and you want Lamborghini fuel, you do not need it. So, the quality issue is a relative thing, it's by geography, by location, and we will do everything possible to make sure that we domesticate this.

“Today, NNPCL does not import any product, we are taking only from domestic refineries. But I also know that we are working jointly with the government to make sure that we manage the issue around prices if we have to source all our supply from the domestic market. It will be an issue and we are already resolving it. I can confirm that substantial work has been done and this will no longer be an issue.”