The Nigerian National Petroleum Company Limited (NNPC) is under pressure to fulfill its $1 billion crude oil supply commitment to Dangote refinery, constituting part of the payment for its 20% equity acquisition in the facility. This move, reported by BusinessDay, has raised concerns among domestic producers, who fear it could deter investors from the industry....CONTINUE READING
The 650,000-barrels-a-day Dangote refinery, commissioned in May, has remained idle awaiting crude oil supply. NNPC faces the risk of losing part of its equity if it fails to meet this obligation. The total government equity in the refinery is valued at $2.7 billion, with a payment mechanism involving $1 billion in cash and an additional $1 billion worth of crude oil supply.
Despite the lack of transparency in the NNPC’s disclosure of transaction details, it is revealed that only $1 billion has been paid in cash for the 20% equity. The remaining $1 billion in crude oil and $700 million through earned dividends are yet to be fulfilled. The urgency to meet these obligations is highlighted by the impending risk of equity loss.
Recent reports indicate that NNPC plans to supply the Dangote refinery with up to six crude oil cargoes in December for testing purposes. However, the full ramp-up of the refinery is expected to take several months, with analysts predicting a phased start-up and the production of lower-quality petroleum products before Euro V standard petrol is achieved in the second half of the following year.
Dangote, at the refinery commissioning, expressed confidence in meeting Nigeria’s refined product needs and becoming a key player in the African and global market. The facility’s financiers, including various banks, emphasize its significance, terming it “too big to fail.” Devakumar Edwin, Group Executive Director of Dangote Industries Ltd., refutes claims of a lengthy ramp-up, asserting that the refinery is gearing up for test runs while the timeline for commercial production remains uncertain.
As the refinery prepares for test runs, officials from NNPC reveal that while the plant is capable of processing a full range of crude grades, initial intake is expected to include major Nigerian streams such as Bonny Light, Forcados, and Egina. The Nigerian Upstream Petroleum Regulatory Commission emphasizes its commitment to prioritize domestic crude oil refining, with the Dangote refinery poised to play a crucial role in impacting the nation’s economy.
