Dangote prioritises diesel export on low local patronage

…Struggles to sell 29 tankers locally

…NNPC seeks permanent presence in refinery

The Dangote Petroleum Refinery is reportedly shifting its focus from domestic diesel sales to exports as petroleum marketers and importers in the country refuse to patronise it.

Speaking during an X (formerly Twitter) space hosted by Nairametrics, Devakumar Edwin, vice president of Dangote Industries Limited expressed concern over the lack of patronage from petroleum marketers due to low pricing strategies on its product sales.

Read also: NNPC seeks permanent presence at our refinery in crude deal – Dangote

“Over 95 percent of petroleum product importers in Nigeria are not buying from the Dangote Refinery. The Dangote Refinery struggles to sell about 29 diesel tankers per day due to low patronage from local petroleum products importers,” Devakumar said.

He added, “Due to this poor local patronage, Dangote refinery exports most of its diesel and aviation fuel”.

Local marketers’ preferences for import

Edwin noted that local marketers wrote to President Bola Tinubu, complaining about the refinery’s pricing strategies.

“Petroleum product marketers in Nigeria have written to President Bola Tinubu to complain that the refinery local prices which have dropped from N1,200 to N1,000 and now N900 per litre are impacting their businesses negatively,” he said.

Edwin suggested that there is a deliberate attempt by some marketers to block the refinery’s operations, as they prefer to import products rather than support local refining.

He explained that in response to market dynamics, the refinery reduced prices twice to encourage sales, but this only led to further resistance from the marketers, who accused the refinery of undercutting the market.

“The whole purpose of doing this refinery in Nigeria was to utilise our local crude instead of exporting raw materials and importing finished products,” he explained. “We should be able to refine and use the finished products within Nigeria and produce more to export the surplus.”

Despite the refinery’s large production capacity, local marketers are only purchasing about 3percent of the output.

He noted that the remaining 97 percent of the refinery’s production, including diesel and jet fuel, is being exported due to a boycott by local traders who refuse to buy at the refinery’s lower prices.

This has forced the refinery to explore international markets, exporting the majority of its refined products, even though it was originally intended to supply the Nigerian market.

Read also: 95% of marketers don’t buy our diesel over low pricing – Dangote refinery

54 million litres

Edwin said that the refinery can produce up to 54 million liters of refined petroleum products per day, depending on the crude oil supply.

However, local crude supplies have been inconsistent, forcing the refinery to rely on imported crude from countries like the United States and Brazil.

This situation has been exacerbated by international oil companies (IOCs) prioritizing foreign markets, often selling crude oil at prices significantly above the market rate for local buyers

He added that the refinery’s production capacity is more than sufficient to meet Nigeria’s petroleum needs. He stated that 44 percent of the refinery’s output is enough to cover 100 percent of the country’s demand for refined products.

Speaking on the Brekete Family live show last Monday, Edwin said Dangote petrol would be exported if the NNPC and other petroleum dealers in the country refused to patronise it.

Asked if the petrol would be sold locally, Edwin replied, “There has been a kind of a blockade from lifting our products within the country. The traders have been trying to blockade, and so now, we have been exporting our petroleum products. We are ready to pump in PMS as much as possible to the country.

“But if the traders or NNPC are not buying the product, obviously we will end up exporting the PMS as we are doing with the aviation jet and diesel,” he declared.

Edwin expressed surprise that the company started facing challenges it never expected when the refinery was set to commence operations.

Read also: FG blames NLC for blocking sale of refineries to Dangote in 2007

He recalled that the philosophy initially was to add value to the raw materials available in the country, regretting that Nigeria was still exporting crude and importing refined petroleum products after over three decades.

Despite having a gantry that can load 2,900 tankers per day, Edwin disclosed that the refinery had not loaded up to five per cent of the gantry’s capacity owing to low local patronage.

NNPC seeks permanent presence

Edwin said NNPC expressed interest in securing a permanent presence at the Dangote Refinery in Lagos, as part of a proposed crude oil supply deal.

“NNPC has informed us that they intend to station a team of 6 to 10 people permanently at our refinery. They’ve asked us to provide office space for them since they will be supplying the crude, overseeing the production, and buying back the products in Naira,” Edwin said.

Edwin explained that talks with the NNPC are focused on a new crude supply model, in which the refinery would purchase crude from the government in Naira and sell PMS in the same currency, instead of using dollars.

He said that negotiations are still in progress, with key issues such as crude pricing and the Naira exchange rate yet to be settled.

“We are still in talks with the government about receiving crude in Naira. The discussions are ongoing, and nothing has been finalized yet. Some unresolved issues include the pricing of crude, the pricing mechanism, and determining the appropriate exchange rate for the Naira,” he said.

This change represents a major shift from the refinery’s initial business model as a free zone entity, which was intended to conduct transactions in dollars.

Edwin said that Aliko Dangote agreed to the federal government’s suggestion to sell NNPC products to the government in Naira, even though this could result in financial losses.

According to Edwin, Dangote said the critical need for foreign exchange and the deteriorating value of the Naira as key factors in his decision to proceed with the deal.

Read also: Dangote refinery eyes Nigeria’s $268m polypropylene market

“Dangote intervened and said, ‘We are going to accept this because the country desperately needs foreign exchange, and the value of the Naira is deteriorating every day. I understand that I am going to take a loss – because, by the time we sell the product and convert it to dollars, the exchange rate may have worsened.’”

Edwin stated that in his commitment to the national cause, Dangote added, “I am willing to take this loss in the interest of the country. I don’t mind, the country is in bad shape. Someone has to take certain risks, and I am ready to face this loss, no matter how significant it may be.”