By Adewale Sanyaolu
Strong indications emerged yesterday, that early hopes of the full take-off of the 650,000 barrels per day Dangote refinery may have run into murky waters over the low supply of its major feedstock-crude oil for its day-to day operations.
A source close to the operations of the refinery said the state oil company-Nigerian National Petroleum Company Limited (NNPCL) has failed in its obligation to supply the refinery with the required volume of feedstock needed.
The NNPCL has a 20 per cent stake in the refinery. The stake was designed to be serviced through the supply of oil to the refinery, a development that has become a challenge for NNPCL.
In August 2023, NNPC said it secured a $3 billion emergency crude repayment loan from Afreximbank to support the naira and stabilise the foreign exchange market. Nigeria will pay an interest of 11.85 percent per annum on the $3.3 billion “pre-export finance facility” (PxF) arranged by Afreximbank.
Nigeria pledged a total of 164.25 million barrels of crude oil — at 90,000 barrels per day (bpd) — starting from 2024 to repay the loan through Project Gazelle.
The source added that crude oil theft was also a major setback to the aspirations of the refinery as a large chunk of oil produced by International Oil Companies (IOCs) and indigenous producers were largely stolen, starving the refinery of its required volume.
Figures from the Nigerian Upstream Regulatory Commission (NUPRC) showed that with the addition of condensate, Nigeria’s oil production rose to 1.64 million barrels per day in January 2024, up from the 1.55 million barrels per day recorded in December 2023.The figure is, however, subject to fluctuations as a result of oil theft among other industry challenges.
The source who pleaded not to be named because he was not authorized to speak on the matter added that a larger percentage of the country’s oil production was used in servicing its loan obligations to some of its creditors.
“For a refinery of that size, what we require to take-off operations is about 6 million barrels of oil. What we have in stock is about that range. But the challenge now is that if we exhaust that stock without hopes of replacement where do we do from there?
“The refinery is not a facility you shut down at intervals if there aren’t planned maintenance, else you end up destroying the facility.
“At the moment, we are only producing Diesel which is not even enough to power out trucks. The development is a setback for the country as most countries within the West coast are already looking forward to the take-off of the refinery because it would save them a lot of cost as as against importing from Europe and other parts of the world due to proximity.
The source added that the big deal for the refinery which Nigerians are waiting for is petrol but the absence of the required feedstock to fire the refinery to production was simply not available.
But not ready to take chances over likely epileptic supply which may threaten its operations, Dangote refinery recently announced plans to import crude from the US in the coming months.
The move by Dangote to seek external feedstock supply for its operations maynot be unconnected with doubts hitherto expressed by industry observers that the Nigerian State maybe unable to meet the crude oil demand for the refinery.
They argued that crude oil theft, lack of new investment in fresh oil fields may cause a major setback for the refinery.