Home » Dangote refinery: Oil majors blame theft and low production for poor crude supply.

Dangote refinery: Oil majors blame theft and low production for poor crude supply.

by Admin


Major oil companies have lamented the impact of oil theft and pipeline vandalism on the availability of crude for local refineries.

The Director-General of the Lagos State Chamber of Commerce and Industry, Dr. Chinyere Almona, speaking on behalf of the companies, identified crude oil theft and pipeline vandalism as factors hindering the oil majors’ ability to meet their daily quotas.

Almona also explained that modular refineries were struggling to get enough crude oil.

She noted that low crude oil production in Nigeria limits international oil companies’ capacity to supply crude to the Dangote Petroleum Refinery and other modular refineries.

According to the latest data from the Nigerian Upstream Petroleum Regulatory Commission, Nigeria produces 1,281,478 barrels of crude oil daily (excluding condensates) as of April 2024. This is a drop from the 1,426,574 barrels per day produced in January this year.

The $20 billion Dangote refinery in Lagos can refine 650,000 barrels per day, while Nigeria’s 25 modular refineries, when fully functional, can process about 200,000 barrels of crude daily.

IOCs and the Nigerian National Petroleum Company Limited export crude oil to raise foreign exchange. Crude oil is an international product priced in U.S. dollars.

Oil theft, pipeline vandalism, and other upstream oil sector challenges have plagued Nigeria’s crude production for several years. This has led to low oil production, a situation the Oil Producers Trade Section in Nigeria, a subgroup of the Lagos Chamber of Commerce and Industry, blamed for the inability of IOCs to provide adequate crude oil to the Dangote Refinery and other local refineries.

In April, the Speaker of the House of Representatives, Abbas Tajudeen, stated that Nigeria loses N1.29 trillion annually to oil theft, pipeline vandalism, and other forms of criminality. He noted that Nigeria loses about 300,000 barrels of crude oil per day to theft.

The President of Dangote Group, Aliko Dangote, has raised concerns that IOCs in Africa prefer to export crude instead of serving countries on the continent. He acknowledged that NNPC is doing its best to supply feedstock to the refinery, but the IOCs want to sell outside the country.

Almona explained that low crude production in Nigeria is a challenge. She emphasized that the issue of oil theft, pipeline vandalism, and policy concerns are major factors responsible for low crude oil production in the country.

The LCCI DG also pointed out that issues around pricing and supply contracts between the Dangote refinery and IOCs should be addressed by the government through NNPC and NUPRC.

Meanwhile, modular refiners have been pushing for the sale of crude oil in naira, against the usual practice of trading in dollars. Recently, the government allowed them to pay for the product in both dollars and the naira equivalent based on agreed terms with crude producers, primarily IOCs.

Operators of modular refineries have raised concerns about their inability to access crude from IOCs, causing them to refine below capacity and incur daily losses.

The Chief Executive Officer of NUPRC, Gbenga Komolafe, stated that the commission had developed regulations to ensure crude oil supply to indigenous refiners, emphasizing the importance of complying with the provisions of the PIA.

The NUPRC recently promised to ensure the supply of crude oil to domestic refiners, implementing the Domestic Crude Oil Supply Obligation to guarantee a consistent supply to existing licensed and operating refineries.



0 comment

Related Articles

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.

Subscribe to our magazine to get news direct to your inbox.

Subscribe to our magazine to get news direct to your inbox.

You have Successfully Subscribed!