Dangote refinery has cut the ex-depot price of petrol from 990-naira to 970 -naira per litre. Meanwhile, the management of the refinery struck a deal with oil marketers over the weekend; among the resolutions include the refinery guaranteeing to sell an average of 28 million litres of petrol daily for the next six months to oil marketers for domestic consumption. Meanwhile, the Nigerian National Petroleum Company Limited has issued a directive to oil marketers to cease the importation of petrol, asserting that the Dangote Refinery possesses sufficient capacity to meet local demand. Temitope Kolade, Senior Manager, Oil Gas and Power Unit at Andersen Nigeria joins CNBC Africa for more.
Dangote refinery has cut the ex-depot price of petrol from 990-naira to 970-naira per litre. Meanwhile, the management of the refinery struck a deal with oil marketers over the weekend. Among the resolutions include the refinery guaranteeing to sell an average of 28 million litres of petrol daily for the next six months to oil marketers for domestic consumption. Meanwhile, the Nigerian National Petroleum Company Limited has also issued a directive to oil marketers to cease the importation of petrol, asserting that the Dangote Refinery possesses sufficient capacity to meet local demand. Temitope Kolade, Senior Manager, Oil Gas and Power Unit at Andersen Nigeria joins me now for more on this discussion. Mr Kolade, thanks a lot for joining us on the show today. I was having a conversation earlier with Bimini from ZCrest looking at the forecast for oil production volumes, but let's focus now on the talks of outcomes from this week's deliberations between Dangote Refinery and the oil marketers. Are you surprised by some of these movements we've seen so far? The cut of the ex-depot price and also looking at the deal struck, looking to sell an average of 28 million litres of petrol per day for the next six months. Yeah, thanks a lot David for having me. I'm not surprised at all. Anyone who is conversant with what is happening within the downstream sector of the oil and gas industry in Nigeria would recognize that it's a moving conversation and for a very long while we're going to continue to have this conversation around what's the right price because it's a free market. It's not regulated pricing anymore and every player within the sector would like to maximize their profits and maximize the opportunities that are available for them within that industry. I think really what the question is, is whether indeed we even know how much we consume in terms of petroleum products on a daily basis in Nigeria. Again, because our borders to a very large extent remain porous, so sometimes when you see the numbers you need to interrogate the numbers very closely to understand whether indeed the numbers that have been reported are really so. And so until we do that we may not be able to say for a fact that what Dangote produces for us or refines for us in a day would satisfy the needs of Nigerians and whether indeed we don't need to import. That's one side of the conversation. The other side of the conversation is whether again we can rely on a single source for the market knowing full well that there are always concerns around energy security and it's really about ensuring that you diversify your influence to the market. So I think those conversations are necessary before we start saying that we really do not want to say never to a particular source and again we just want the price to be agreed based on the market forces and that would mean that we need to check what's happening in international markets as well. Yeah and talking about how we do a right balancing act with all of these but we also have to take a look at some of the risks so far that have unfolded the concerns area since the commencement of the Naira crude oil sales. Now we're hearing from Corin as well now where certain concerns have been raised as to domestic refiners looking to import oil over the failure of the shortcomings of the Naira crude oil sale. NMPC according to the Dangute refinery team is yet to meet fully the supply target. So when we contextualise all of these developments here and this really goes back to your statement on whether or not we can rely on a single source for you in the coming days how do you see things panning out going forward? Okay you know there is this latin magazine that says basically saying that you can give what you don't add right. If you think about the production figures today for Nigeria and NPCL says it's 1.8 million barrels per day for October and then NUPRC says oh it's 1.7 if you add condensates about 1.7 million. OPEC tells you it's about 1.5 million right. So again whose reports do we believe in here? But even when you take the highest of it all 1.8 million you say how much of this belongs to NNPC? How much are we committed based on the forward sales that we have agreed based on the debts that have been taken through the NNPCL? Then how much is left to meet the demands of Dangute which goes to about three hundred and three hundred and eighty something thousand barrels per day that they've said we would agree to giving you whereas Dangute indeed really only needs 650 to operate at maximum capacity. So those conversations are there and until we are able to assure ourselves as a nation that our production has gotten to the right level we've dealt with the issues of theft, we've dealt with the issues of vandalization, we are ramping up production to even exceed the OPEC quota we may not really be able to have fruitful conversations as to whether we'll be able to give enough to the local refineries in Nigeria. Already the modular refinery operators are complaining that they are not even getting anything at all. So those issues are there until we have it sorted we may not be able to demand a sort of better pricing for the refined product as well because you would only love, I mean Dangute may have to continue to import from the US and other places and then of course it would factor in the cost of importation as well to get its raw materials for refining. Definitely Temutoko, but wrapping up the conversation now we've done quite the roundabout when we are talking about timelines here for the rehabilitation of our refineries bringing into focus Portakos, Wori and Kaduna refineries but the latest from the presidency is saying complete privatization is underway, talks are underway within this regard. Are you optimistic around the discussion points this time around because at the end of the day some would say talk is quite cheap. I'm worried, I'm not very optimistic and the reason is that it's looking like something similar to when we're going to privatize the power sector for instance where people just bidded and just wanted to take ownership of those things. What is the state of those facilities today? Can they operate over time? These things depreciate and one of the biggest conversations that we've had over time is that we want to just sell these things, right? What would happen at the end of the sales? Are we expecting that there will really be great production or do we need to even scrap some of the assets there and ensure that we have new ones? What should really be our strategic focus as a nation at this time when people are also talking about renewables, talking about powering the automobile industry with electric vehicles and all of those, so those conversations are there. I'm not sure that this is really the best time to say that we want to privatize. Do we really want to privatize? What do we seek to do with the privatization? Is it to optimize the production in terms of refined products? I'm not sure we would achieve that. If it's to get funds for the government maybe we'll be able to get that result achieved. Well, we'll have to leave the conversation here for now, Mr. Kolade. Thanks a lot for your time on the show today. That was Demetope Kolade, Senior Manager, Oil, Gas and Power Unit at Anderson Nigeria.
Theme: Challenges and Opportunities in Nigeria's Oil and Gas Sector
Dangote refinery has made a significant move in the Nigerian oil and gas industry by cutting the ex-depot price of petrol from 990 naira to 970 naira per litre. This decision comes after the management of the refinery reached a deal with oil marketers over the weekend, guaranteeing to sell an average of 28 million litres of petrol daily for the next six months for domestic consumption. In related news, the Nigerian National Petroleum Company Limited has directed oil marketers to halt the importation of petrol, citing the Dangote Refinery's capacity to meet local demand. To shed more light on these developments, Temitope Kolade, Senior Manager at Andersen Nigeria, shared insights on the implications and challenges within the sector. The discussion with Mr. Kolade highlighted key points surrounding the refinery's pricing strategy, supply agreements, and the overall landscape of Nigeria's oil and gas market. One of the critical issues raised was the uncertainty around Nigeria's daily petroleum consumption due to porous borders and the need to assess if Dangote's production could suffice without the requirement for imports. The conversation also touched on the risks associated with the Naira crude oil sales and the challenges in meeting supply targets as outlined by the NNPC. Moreover, Mr. Kolade addressed the ongoing discussions on rehabilitating and privatizing refineries in Port Harcourt, Warri, and Kaduna. While the government contemplates privatization as a solution, concerns persist regarding the operational readiness of such assets post-privatization, especially in the context of broader energy industry transitions towards renewables and electric vehicles. As the industry grapples with these complex issues, the key theme revolves around balancing market dynamics, domestic supply constraints, and the long-term sustainability of Nigeria's energy infrastructure. The discussions between Dangote refinery and oil marketers signify a pivotal moment in reshaping the country's fuel pricing mechanisms and supply structures. In conclusion, the future trajectory of Nigeria's oil and gas industry remains intricately tied to strategic decisions around refinery operations, supply chain efficiencies, and the broader energy transition agenda. As stakeholders navigate the complexities of market fluctuations and regulatory frameworks, the need for comprehensive and sustainable policies becomes increasingly paramount in ensuring a resilient and competitive industry landscape.
"I'm not sure that this is really the best time to say that we want to privatize. Do we really want to privatize? What do we seek to do with the privatization? Is it to optimize the production in terms of refined products? I'm not sure we would achieve that."
['Dangote refinery', 'petrol price', 'Nigeria oil and gas industry', 'supply agreements', 'NNPC', 'refinery privatization']