Local refining may reduce petrol prices to N300 per litre - Modular refineries

The pump price of Premium Motor Spirit, also known as petrol, is expected to fall to around N300/litre once the Dangote Petroleum Refinery and other indigenous producers begin major output, modular refinery operators said Sunday.

However, they stated that this would be achieved if the government ensured adequate crude oil supply to local refiners, emphasising that foreign refineries were ripping off Nigeria.

Speaking on behalf of the Crude Oil Refinery Owners Association of Nigeria, they indicated that what happened to the cost of diesel when Dangote began producing it would happen to petrol prices if it was mass-produced in Nigeria.

CORAN is a registered association in Nigeria that represents modular and traditional refinery operators.

"A lot of companies today benefit from the importation of petroleum products at the expense of Nigerians," said Eche Idoko, CORAN's Publicity Secretary.

He told our correspondent that "if we begin to create PMS today in huge amounts, given there is adequate crude oil supply, I can tell you that we would be able to buy PMS at the pump price of N300/litre.

"Why force Nigerians to pay nearly N700 per litre when you know that allowing refineries to run will reduce the price? Is it because you want to gratify the worldwide refiners who benefit so much from us?"

When reminded that there are arguments that such a price drop is impossible since crude oil, the raw material for PMS, is priced in dollars, the CORAN official asserted that petrol prices will fall once it was produced in large quantities by local refiners.

He stated, "We were selling diesel for N1,700 to N1,800 per litre, but once the Dangote refinery began production, he reduced the price to N1,200 per litre." What other proofs do you require?

As I speak to you, diesel prices are expected to fall more before December. The only reason diesel is not priced lower N1,000 a litre is due of our exchange rate.

"If the exchange rate falls, diesel prices will fall below N1,000 per litre." Dangote imports crude, which is why the currency rate is causing concern. If he is not importing, the currency rate may not have as big impact, but he is still purchasing crude in dollars (in Nigeria).

On May 18, 2024, it was reported that Africa's richest man, Aliko Dangote, announced that the Dangote refinery's plans will eliminate Nigeria's need to import petrol beginning in June of this year.

Dangote also asserted that his refinery could supply West Africa's petrol and diesel needs, as well as the continent's aviation fuel requirements. He spoke at the Africa CEO Forum Annual Summit in Kigali, where he expressed hope about altering Africa's energy sector.

"Right now, Nigeria has no cause to import anything apart from petrol (petrol) and by sometime in June, within the next four or five weeks, Nigeria shouldn't import anything like petrol; not one drop of a litre," the billionaire had stated.

Dangote also reduced the pump price of diesel to N1,200/litre earlier this year, when it was retailing for between N1,700 and N1,800/litre.

He further reduced the price to less than N1,000/litre, but was unable to maintain this level due to the exchange rate increase. The refinery eventually reset the pricing to its original level of N1,200/litre.

Speaking on Sunday, the CORAN spokesperson explained that this is why the modular refiners have been advocating for the sale of crude oil at the naira equivalent of the dollar rate.

"We have informed them (the government) that even the dollars you are asking us to use to purchase this goods are destructive to the country. Strengthen the naira. We will buy at the worldwide market rate, but in nairas.

"These are the difficulties, and they are aware of them; nonetheless, we cannot explain why they are unable to make decisions to address these concerns.

"Get crude to local refineries, allow crude purchase in naira equivalent, make the environment business-friendly and watch locally produced petroleum product prices crash," Idoko said.

Nigeria now has 25 licenced modular refineries. Five of them are now operational and producing diesel, kerosene, black oil and naphtha. About ten are in various stages of completion, while the rest have received licences to operate.

Operators of modular refineries previously indicated that, aside from the five that are already operational, the remaining plants are facing substantial challenges due to crude oil scarcity, a scenario that has stalled investment from financiers.

"Only about five of our members have finished their refineries." The others are facing a big difficulty.

"The challenge is that the people who are supposed to finance them have not disbursed financing for construction because they require some level of guarantee."

"A guarantee that if they finish the refinery, they are going to get feedstock, which, of course, is crude oil," Idoko had clarified.

Oil marketers also predict that if production resumes in Nigeria, the price of petrol will be lower than it is now.

They praised Dangote's announcement that his refinery will begin producing petrol this month, and expressed hope that the cost would be lower than what the Nigerian National Petroleum Company Limited now sells.

"We expect a lower price for locally produced PMS, as I previously stated," said Abubakar Maigandi, National President of the Independent Petroleum Marketers Association of Nigeria.

Maigandi, speaking to our correspondent from Saudi Arabia on Sunday, also revealed that no date has been notified to marketers for Dangote's delivery of petrol to the market. Officials from Dangote Refinery have stayed silent on the matter.

"It is a welcome development if the refinery can start releasing PMS this month because as marketers we are currently set to start buying the product from the plant," Maigandi said.

The IPMAN president previously claimed that marketers were in discussions with plant managers, but not explicitly on fuel pricing.

"We have been discussing, but not about the price of petrol, but about other issues such as member registration for the purchase of petrol and diesel from the refinery."

"Yes, we have started buying diesel from them, but you must first register with the company. So a general registration is underway," he explained.

Maigandi, on the other hand, claimed that, while marketers had yet to receive the plant's estimated petrol price, dealers expected a PMS price of around N500/litre from the Dangote refinery.

"We are looking at getting it (PMS) at any price lower than the NNPC pricing. The NNPC sells petrol at N565.50/litre, so we expect something lower, possibly around N500/litre," Maigandi stated.

The oil dealers also supported the provision of crude oil to local refiners, emphasising that this would have a good impact on the cost of refined petroleum products.

"Of course, it is important for crude to be made available to local refineries because this will surely affect petroleum products' prices positively," said the president of IPMAN.

Regulators speak

George Ene-Ita, spokesperson for the Nigerian Midstream and Downstream Petroleum Regulatory Authority, stated that he was confident that the government had standards for providing feedstock (crude) to indigenous refiners.

Ene-Ita promised to provide more information on the subject, but indicated that he was unable to do so at the time our correspondent called him.

Remember that Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, previously guaranteed that the government would ensure that crude oil was provided to domestic refineries.

He noted that, in accordance with Section 109(2) of the Petroleum Industry Act 2021, the NUPRC established a template to guide the actions of the Domestic Crude Oil Supply Obligation.

"The commission, in collaboration with relevant stakeholders from NNPC Upstream Investment Management Services, representatives of Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery, developed a template for universal buy-in.

"This is in a bid to foster a seamless implementation of the DCSO and ensure consistent supply of crude oil to domestic refineries," said Komolafe.

Source: PUNCH