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NEWS

Refinery Test Run: NNPC Agrees to Supply Refinery 6million Barrels in December

November 3, 2023 • 4 min read

The Nigerian National Petroleum Company Limited (NNPC) will supply the new 650,000 barrel-per-day Dangote Oil Refinery with up to six million barrels of crude oil in December, to be used in test runs, three industry sources with knowledge of the matter, have told Reuters.

There have been some concerns in recent times, about the capacity of the crude oil producers to supply the refinery the needed feedstock.

On Wednesday, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) summoned the producers to sensitise them on the need to comply with their domestic supply obligations to local refineries in line with the Petroleum Industry Act (PIA).

Aliko Dangote,President Dangote Group

The refinery, funded by Africa’s richest man, Aliko Dangote, would transform oil trading in the Atlantic Basin and remove a lucrative outlet for fuel produced in Europe and the United States that have for
years powered the cars, trucks and generators on the continent, Reuters added.

The refinery is in the Lekki free trade zone near Lagos.

Once it is fully up and running, it would turn oil powerhouse 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 totally 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”.

The other sources said about 4-5 cargoes, or at least 130,000 bpd, were planned. A Dangote Group official, who did not wish to be named, said “some of the agreements have confidentiality clauses” without elaborating when asked about the NNPC supply deal.

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 Reuters report said.

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 learnt that the development is coming as plans are being concluded for the signing of a Sales And Purchase Agreement (SPA) between the national oil company and the refinery. The formalisation of the agreement is scheduled to take place in the coming weeks.

The deal will be on a purely commercial basis and without any recourse to discount, or selling at rock-bottom prices, it was learnt.

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 petroleum refinery with a capacity to process 650,000 barrels per day is sitting on 2,635 hectares of land located in the Free Zone in Ibeju-Lekki, Lagos.

The Dangote, refinery complex is reputed to have a pipeline infrastructure arguably the largest in the world. It has 1,100 kilometres gas pipeline to handle 3 billion standard cubic feet of gas per day and a 400MW power plant that can meet Ibadan Distribution Company (Disco) total power requirement. It is also said to be more than six times the size of Victoria Island.

During the week, the Gbenga Komolafe-led NUPRC stated that “it is going to be a matter of national shame if we cannot meet our domestic crude obligations to step up our refining capacity. Komolafe added that the Dangote refinery was ready and should be provided with crude.

Reuters