NNPC Ends Decades Of Petroleum Importation, Partners With Dangote Refinery For Local Supply

After decades of massive importation of petroleum products, the Nigerian National Petroleum Company Limited (NNPC) on Monday announced that it had finally ended the age-long practice.

The development is expected to save Nigeria as much as $10 billion in hard currency in-country annually, as the national oil company said it now buys from the 650,000 barrels per day Dangote Petroleum Refinery located in Lagos.

Group Chief Executive Officer of NNPC, Mr. Mele Kyari, disclosed this in Lagos, while delivering his keynote message at the ongoing 42nd annual international conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE).

The announcement came amid another cheery news by the Independent Petroleum Marketers Association of Nigeria (IPMAN) that it had struck a deal to buy products directly from the $20 billion Dangote facility.

The previous arrangement was for the independent marketers to buy from the NNPC and not from the Dangote Refinery, a practice the oil sellers had vehemently opposed.

But drawing strength from the Domestic Crude Oil Obligation (DCOO) as stipulated in the Petroleum Industry Act (PIA) 2021, Kyari also said all the oil producers in the country must supply crude to the four NNPC refineries when they come back on-stream.

He disclaimed assumptions that the national oil company was sabotaging local refineries by refusing to sell crude oil to them.

Kyari profiled NNPC as a proud part owners to the Dangote Refinery, explaining that the company saw an opportunity in the $20 billion refinery as a clear market for at least 300,000 barrels per day of its production, which will enable it to avert being caught in the emerging shrinking market for crude oil.

“Oil is found in very many unexpected locations across the world and people have choices. And therefore, we saw an opportunity to now supply to not just Dangote, but every refinery that operates in the country. So, it’s a well informed business decision. Therefore, from day one, we knew that it was to our benefit to supply crude oil to domestic refineries.

“So, we don’t need to be persuaded. We don’t need anyone to talk to us. There is no need for any pressure from the streets for us to do this. We are already doing this”, Kyari stated.

Highlighting the implications of the pressure for oil producers in Nigeria to supply crude to local refineries and in naira too, Kyari said Nigerian crude is a premium type of crude that attracts premium price

In the global market, he explained that refiners buy Nigerian crude to blend with their dirtier crude to process, adding that only few refineries take Nigerian crude for direct processing because of its expensive and high premium nature.

Kyari disclosed that the NNPC had stopped importing refined petroleum products in line with the company’s support to local processing of all crude produced in the country.

Kyari stated: “And therefore, I believe strongly also that we must process all the crude that we produce in the country up to the optimum. And we will do everything possible to make sure that we domesticate this. And today, NNPC does not import any product. We are taking wholly from the domestic refinery.”

He said the company was also working jointly with the federal government to manage the issue of pricing, which is one of the implications of sourcing all feedstock supply from the domestic market.

He confirmed that substantial work had been done around that, adding that it will no longer be an issue.

He further disclaimed what he described as issues on the streets that the NNPC does not want to sell crude to domestic refineries in naira and that it’s a form of sabotage.

“As a matter of fact, it makes no difference to us because if you sell crude to domestic refinery in naira and you buy product in naira from a domestic refinery, it’s a netzero game. You lose nothing. Otherwise, whatever you do, you still have to source for FX because you have to import,” he added.

Reminding other oil producers in the country that the domestic crude oil obligation applies to both NNPC and them, Kyari told the producers that they must supply crude to the four NNPC refineries when they return to production.

He clarified that selling crude to local refineries in naira didn’t mean losing the value of the product but that the only difference was that the foreign exchange gap will be removed in the process to boost local currency and country’s economy.

Kyari explained: “And for those of us in the upstream, don’t forget that we have domestic crude oil supply obligation. It is not NNPC-only obligation. You must understand this. But the DCOO doesn’t mean a loss in value. It says sell it at market price, at commercial value.

“It also serves the best interest of the businesses here, it also shows commitment beyond the talk. So, let’s all not forget that everyone in the industry contributes to this.

“Which means, and to be very practical, when NNPC refineries start working, we will come to you and tell you that you must contribute to supply to these refineries. It’s in the law. It doesn’t have to come from NNPC. And we will make sure we don’t fight with anyone. But if we don’t find our oil, we come to you.”

On ensuring gas delivery to the domestic market, he complained that only NNPC has been left to carry the burden of building the entire gas delivery infrastructure till date, as all the projects were on the balance sheet of NNPC.

He said the company has accepted to carry the burden to guarantee energy security for the country as mandated by the PIA.

In promotion of the Compressed Natural Gas (CNG) penetration in the country, Kyari confirmed that by the first quarter of 2025, at least 12 mother CNG stations will be available in the country.

In addition, he revealed that the company was building a mini Liquefied Natural Gas (LNG) plant in an unspecified location in the country to deliver gas into the market.

The facilities, he stated, will also sustain the growth of CNG delivery to the domestic market and equally make gas available to mid power plants and gas-based industries in the short term.

Also speaking at the event, Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Gbenga Komolafe, disclosed that Nigeria’s oil production has increased to 1.8 million barrels per day.

In his speech delivered by the Executive Commissioner, Development and Production, NUPRC, Mr. Eronense Amadasu, Komolafe said the country’s oil production would rise further to 2 million bpd by December this year.

He added that the framework in pursuit of the Project 1 Million BPD championed by the commission was currently under development.

The project which aimed to increase Nigeria’s oil production by an additional one million barrels in the next 12 to 24 months was launched last month by President Bola Tinubu.

The commission chief executive however faulted the perception that the International Oil Companies (IOCs) operating in Nigeria were leaving the country, saying the multinationals were only rationalising their portfolios in the wake of the changing energy landscape.

He said NUPRC had put in place robust divestment guidelines to ensure a smooth transition, reiterating that the commission is currently auctioning 31 oil blocks spreads across the onshore, shallow water and deep offshore terrains and that the process was going on smoothly.

Also speaking, the Executive Secretary of NCDMB, Mr. Felix Ogbe, who also spoke at the NAPE conference, said with 54 per cent local content already attained under the 10-Year Strategic Roadmap, the organisation was pushing to achieve the targeted 70 retention by 2027.

In line with the Presidential Executive Orders on oil and gas, which border on the contracting cycle, Ogbe, who was represented by the General Manager, Corporate Communications and Zonal Coordination, Mr. Dan Kikile, said the agency has reduced the approval timelines to 60 days.

He enjoined industry operators to continue paying their local content levy to enable NCDMB continue to fulfil its mandate and responsibility for the industry.

Meanwhile, following its recent meeting with Aliko Dangote and members of his top management staff in Lagos, the leadership of IPMAN, on Monday announced major milestones achieved during the event.

Addressing some members of the press in Abuja on Monday, National President of IPMAN, Abubakar Shettima, stated that the Dangote Refinery had obliged IPMAN to lift petrol, diesel and kerosene directly for onward supply to its depots and retail outlets.

According to the IPMAN president, this new arrangement with the Dangote Refinery will ensure steady and ceaseless supply of petrol products all over Nigeria at an affordable rate for Nigerians also.

He said: All IPMAN members should fully support the Dangote Refinery, as it’s the ideal thing to do considering the monumental benefits of backward integration and the medium to long term impact it will have on the Foreign Exchange markets in Nigeria

“IPMAN members nationwide should rely on the Dangote Refinery and Nigerian Refineries for their white products, as this will translate into ensuring more job opportunities in Nigeria, as well as signify that total support for President Bola Tinubu’s renewed hope agenda,” he added.

On CNG, Shettima called on all members of IPMAN to begin to put all machinery in place for a successful transition of the federal government’s plans to initiate CNG refill stations in all our outlets.

“Truly there is no doubt that CNG has the potential to rejuvenate our economy for a better life for Nigerians, and IPMAN is ready to give her all to support the CNG initiative,” he added.

Besides, IPMAN called for partnership with the federal government to accelerate the CNG initiative for Nigeria.

“We believe that for the CNG initiative to be successful, there must be a credible partnership between IPMAN and the Presidential Compressed Natural Gas Initiative (PCNGI), without which Nigerians would not have ready and near access to CNG outlets,” he explained.

Emmanuel Addeh and Peter Uzoho

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