The Vice President of Dangote Industries, Mr Devakumar Edwin, commended the commission in a statement on Wednesday in Lagos.
Edwin said that NUPRC should also be commended for publishing the Domestic Crude Supply Obligation (DCSO) guidelines to enshrine transparency in the oil industry.
He said: “If the Domestic Crude Supply Obligation (DCSO) guidelines are diligently implemented, this will ensure that we deal directly with the companies producing the crude oil in Nigeria as stipulated by the PIA.”
Edwin said that IOCs operating in Nigeria had consistently frustrated the company’s requests for locally produced crude as feedstock for its refining process.
He highlighted that when cargoes were offered to the oil company by the trading arms, it was sometimes at two dollars to four dollars per barrel, a premium above the official price set by NUPRC.
“As an example, we paid $96.23 per barrel for a cargo of Bonga crude grade in April (excluding transport).
“The price consisted of $90.15 dated brent price + $5.08 NNPC premium (NSP) + $1 trader premium.
“In the same month, we were able to buy WTI at a dated brent price of $90.15 + $0.93 trader premium including transport.
“When NNPC subsequently lowered its premium based on market feedback that it was too high, some traders then started asking us for a premium of up to four million dollars over and above the NSP for a cargo of Bonny Light.
“Data on platforms like Platts and Argus shows that the price offered to us is way higher than the market prices tracked by these platforms.
“We recently had to escalate this to NUPRC”, Edwin said, and urged the regulatory commission to take a second look at the issue of pricing,” he added.
Edwin’s comments followed a statement by the Chief Executive Officer of NUPRC, Gbenga Komolafe, who, in an interview on ARISE News TV, remarked that it was “erroneous” to claim that IOCs were refusing to make crude oil available to domestic refiners.
The statement also quoted Komolafe citing the PIA’s stipulation for a willing buyer-willing seller relationship.
“The NUPRC has been very supportive of the Dangote Refinery, intervening several times to help secure crude supply.
“However, Komolafe’s statement may have been misinterpreted; IOCs have indeed been difficult to deal with directly,” Edwin clarified.
Aside from the Nigerian National Petroleum Corporation Ltd. (NNPCL), Edwin noted that the company had only purchased crude directly from one other local producer (Sapetro).
Other producers refer them to their international trading arms, which act as middlemen earning margins from crude produced and consumed in Nigeria without being bound by Nigerian laws or paying local taxes on their earnings.
Edwin recounted a situation where the trading arm of an IOC refused to sell directly to Dangote Refinery and instead suggested using a middleman.
After nine months of dialogue, the issue was resolved with the help of NUPRC.
“When we entered the market to purchase crude for August, international trading arms informed us they had entered their Nigerian cargoes into a Pertamina (the Indonesian National Oil Company) tender.
“We had to wait for the tender to conclude to see what was available,” Edwin said.
Edwin urged NUPRC to revisit pricing, emphasising that market liquidity was essential for a willing seller-willing buyer basis.
He suggested that domestic crude supply obligations should specify volume obligations per producer and a transparent pricing formula to prevent price gouging.
“The fact that the domestic crude supply obligation as defined in the PIA has gaps is no reason for wisdom not to prevail,” Edwin said.
NAN.
