AFRICA

Payment Issues Stall Unloading of Chinese Oil Cargo at Dangote Refinery

A cargo belonging to Chinese state energy major PetroChina, has been waiting to unload a cargo of US crude at Nigeria’s giant Dangote refinery for nearly a month due to payment issues, quoting four trading sources and its tracking of shipping data.

The impasse, it said, highlights difficulties the $20 billion plant funded by Africa’s richest man, Aliko Dangote, faces in its aim to be the biggest refinery on the continent and in Europe when it reaches full capacity this or next year.

Nigeria has had severe dollar illiquidity for a while as its foreign exchange earnings from crude oil dwindled due mainly to its inability to raise crude oil production.

Dangote aims to reverse the trend by which the oil-rich country exports its crude but almost totally relies on imports of fuel and other refined products.

The 2-million-barrel West Texas Intermediate (WTI) crude cargo shipped by PetroChina onboard supertanker Maran Mira has, however, been floating off Nigeria since March 28, shipping data on LSEG and Kpler showed.

The completion of the oil sale from PetroChina to Dangote has been delayed as the refinery has yet to issue a letter of credit to the Chinese trader, one source familiar with the matter told Reuters.

A letter of credit is the most common form of trade finance. A buyer’s bank sends a letter to the seller’s bank guaranteeing payment to the seller once goods arrive.

PetroChina was also not keen to receive oil products as payment, one of the ways that Dangote has been paying for its crude, the source said.

Two of the sources also told Reuters that the refinery has had difficulty accessing dollars through the Nigerian government, with the naira’s slide against the US dollar as global oil prices have risen straining Nigeria’s finances.

The government did not immediately respond to a request for comment and a Dangote executive did not directly address the issue in comments.

PetroChina has another 2 million barrels of WTI crude onboard supertanker Kondor that is making its way to Nigeria, according to another source and LSEG shiptracking data.

Potential sellers of US WTI crude to Dangote have been confronted with difficult payment terms: either a 60 to 90 credit or an exchange of refined products for the crude oil, three of the sources said. Credit terms for oil deals are typically 30 days. PetroChina did not respond to a Reuters request for comment.

A shipbroker estimated that the ship is incurring demurrage costs of around $65,000 a day.

Dangote group executive Edwin Devakumar told Reuters that seeking favourable sale prices and credit terms were normal business practices.

“If someone gives me one year credit, I’ll grab it and if not, I’ll negotiate the best possible deal,” he said. “When you go to a shop to buy something … You’ll try the best possible deal and I do the same,” he added.

“We are not delayed. If someone’s business is delayed, he is not giving us a good deal,” Devakumar said, without specifically addressing the issue with PetroChina.

The refinery started operations in January and has reached half its capacity in recent weeks but a further increase is being slowed by its need to borrow billions of dollars in working capital to be able to buy large volumes of crude, trading sources said. Devakumar declined to comment on the current run rates at the refinery.

The facility is importing around 10 crude oil cargoes a month, two traders said, roughly half the capacity of 650,000 barrels per day (bpd) it seeks to reach this year or next, which would make it the largest refinery in Africa and Europe.

The amount of Nigerian and US crude discharged at Dangote totalled 8.4 million barrels in March and 5.4 million barrels so far in April, Kpler data showed. Another 1 million barrels of Nigerian crude is expected to arrive on April 27, Reuters.

Trafigura, Mercuria, Vitol, Shell and NNPC were among Dangote’s suppliers of crude last month, according to Kpler.

Emmanuel Addeh

Follow us on:

AriseNews

Recent Posts

Britain Detects Two Additional Cases Of New Mpox Variant, Total Reaches Three

The UK has confirmed two more cases of the new mpox variant, clade Ib

9 mins ago

Ekiti Chief Judge Oyewole Adeyeye Passes Away From Injuries Sustained In Court Building Collapse

Ekiti mourns as Chief Judge Justice Adeyeye dies, succumbing to injuries from a court building…

37 mins ago

Boeing Workers End Seven-Week Strike After Accepting 38% Pay Increase

Boeing workers have accepted a new contract with a 38% raise, ending a seven-week strike…

41 mins ago

Trial Underway for Eight People Accused of Inciting Murder of Teacher Samuel Paty

Eight individuals are on trial in Paris, accused of inciting the murder of teacher Samuel…

1 hour ago

Indonesian Government To Evacuate 16,000 Residents After Mount Lewotobi Eruption

Indonesia is evacuating 16,000 residents after Mount Lewotobi erupted, resulting in nine deaths and significant…

1 hour ago

Philippines Stockpiles Food, Evacuates Towns As Typhoon Yinxing Threatens Northeast

The Philippines is stockpiling food, evacuating towns, and deploying soldiers in preparation for Typhoon Yinxing,…

2 hours ago