In line with the NUPRC appeal and caution, the Nigerian National Petroleum Company Limited (NNPCL) has agreed to supply 650,000 barrels per day to Dangote refinery with up to six million barrels of crude oil by the end of December.
This, according to reports, will be used to test run the refinery following the growing concerns about the capacity of the crude oil producers to supply the refinery they needed.
On Wednesday, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) called on the producers to sensitize them on the need to comply with their domestic supply obligations to local refineries in line with the Petroleum Industry Act (PIA).
The refinery, which is owned by Africa’s richest man, Aliko Dangote is Located in the Lekki free trade zone, Ibeju-Lekki, Lagos sitting on 2,635 hectares of land and can process 650,000 barrels of crude a day.
Once it is fully up and running, it would turn Nigeria into a net exporter of fuels, a long-sought goal for the member of the Organisation of Petroleum Exporting Countries (OPEC) that is currently almost reliant on imports.
One of the sources, an NNPC official, who declined to be named, specified six cargoes, or 200,000 bpd, would be supplied in December, as part of a one-year deal, adding that volumes in future months would be supplied “based on mutual agreement and availability”.
Other industry sources said about 4-5 cargoes, or at least 130,000 bpd, were planned.
The NNPC has a 20 per cent stake in the refinery. The refinery began the commissioning process in May this year after running years behind schedule at a cost of $19 billion, above initial estimates of $12-14 billion.
Commissioning includes testing the different units that make products from petrol to diesel and making sure they respond to the control panels.
The integrated refinery and petrochemical project is expected to generate thousands of direct and indirect jobs, while its output is expected to be more than enough to meet Nigeria’s fuel demands and turn Africa’s largest crude producer into an exporter of refined crude.
It was learned that the development is coming as plans are being concluded for the signing of a Sales And Purchase Agreement (SPA) between the NNPCL and the refinery. The formalisation of the agreement is scheduled to take place in the coming weeks.
It was learned that the agreement will be made only on a commercial basis, with no option to sell at deeply discounted prices.
Section 109 of the Petroleum Industry Act (PIA) 2021 stipulates domestic crude oil supply obligation to refineries, including the Dangote Refinery, as well as NNPC refineries in Port Harcourt, Warri, and Kaduna and the modular refineries scattered all over the country.
The section also provides that the supply of crude oil to the domestic market shall be on a willing buyer and willing seller basis.
Recall that shortly before the inauguration of the refinery, the NNPC had announced that it would supply 300,000 barrels of crude oil to the facility.
However, in September, the Executive Director of Dangote Group, Devakumar Edwin, said the national oil company would not be able to supply the refinery until November. This raised eyebrows throughout the country.
The Dangote, refinery complex is reputed to have a pipeline infrastructure arguably the largest in the world.
It has a 1,100-kilometer gas pipeline to handle 3 billion standard cubic feet of gas per day and a 400MW power plant that can meet the Ibadan Distribution Company’s (Disco) total power requirement.
