Marketers skeptical on IOCs naira-for-crude plan, eye March date

Marketers of petroleum products have expressed scepticism over a plan by international oil companies to sell crude oil to Dangote and other local refineries in naira.

The PUNCH reliably gathered that barring any last-minute change in decisions, international oil companies in Nigeria will join in crude oil sale in naira to the Dangote Petroleum Refinery and other domestic refineries nationwide.

Our correspondent reports that the international oil firms will join the Nigerian National Petroleum Company Limited which started the naira-for-crude deal with the Dangote refinery in October 2024.

The PUNCH learned that the deal is expected to start between now and March 2025. The IOCs will sell crude in the local currency to Dangote and other modular refineries in need of the feedstock.

But for marketers under the aegis of the Independent Petroleum Marketers Association of Nigeria, this may not be possible considering the fact that the IOCs will have to repatriate their funds in hard currency.

The naira crude sale is one of the initiatives of President Bola Tinubu to make crude available to local refineries while reducing the pressure on the naira.

In an exclusive interview with our correspondent, the Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria, Eche Idoko, confirmed the new development, expressing hope that this will reduce the crude crisis faced by local refineries.

According to Idoko, talks are ongoing with the IOC to finalise how the naira-for-crude arrangement will commence. Idoko noted that the purpose is to bolster the domestic crude supply obligation and boost the country’s refining capacity.

“On the naira-for-crude arrangement, progress is being made. At least, we have seen more willingness by some IOCs to transact crude in naira. We hope they will sell to all – Dangote and modular refineries. The discussions are still in progress though,” Idoko confirmed.

As our correspondent pressed further for more details, Idoko stressed that the multinationals are now showing interest in dealing in naira but talks are still at an early stage.

Asked if the naira crude sale would cut across all refineries, he replied in the affirmative.

“Yes, we hope so, at the meeting held last week on the domestic crude supply obligation, we understand that IOCs are ready to start as soon as the first quarter of 2025. So, we see how this goes,” the CORAN spokesman submitted.

He said most of the major IOCs in Nigeria have concluded plans to participate in naira crude sale transactions, though he was not specific about the names of the IOCs involved.

“Most of the majors are willing to sell crude in naira,” he submitted.

Some of the major IOCs in Nigeria are Shell, Chevron, TotalEnergies, Agip, ExxonMobil, among others.

The plan to sell crude in the local currency came a few days after the Nigerian Upstream Petroleum Regulatory Commission threatened to sanction any oil producer that failed to abide by the domestic crude supply obligation.

The commission also warned that it would deny export permits for crude oil cargoes intended for domestic refining if oil companies failed to meet their local crude supply commitments.

In a circular, the regulator stressed that any changes to cargoes designated for domestic refining must receive express approval from the commission’s Chief Executive, Gbenga Komolafe.

This directive followed complaints from local refiners, including the Dangote refinery, over difficulties in securing adequate crude supplies for their facilities.

When the Dangote refinery began production last year, it faced serious crude challenges.

The President of the Dangote Group, Aliko Dangote; his vice, Davakumar Edwin; and other company officials repeatedly accused international oil companies of refusing to sell crude to the refinery, thereby impacting its ability to produce cheaper fuels for Nigerians.

The company also accused the NUPRC of failing to effectively enforce the domestic crude supply obligation, saying it was allowing the IOCs to sell crude at a premium through their foreign agents.

Officials of the 650,000-capacity refinery told our correspondent in June that crude shortage was the main reason the refinery kept postponing petrol production.

Amid the controversies generated by the allegations, President Bola Tinubu approved the sale of crude oil to Dangote in naira.

The President’s aide, Bayo Onanuga, who made the announcement in July, disclosed that the Federal Executive Council approved offering the 450,000 barrels meant for domestic consumption in naira to Nigerian refineries, using the Dangote refinery as a pilot.

Onanuga also revealed that the exchange rate would be fixed for the duration of the transaction.

After much delay, the Dangote refinery started PMS production in September, while the naira-for-crude deal commenced in October. However, the refinery complained of low crude supply, especially as it plans to hit full capacity soon.

To avoid having its ramp-up plans disrupted, the refinery is looking elsewhere for its crude, importing 12 million barrels from the United States lately.

Aside from the Dangote refinery, modular refineries said they were sidelined in the naira-for-crude deal as the committee supervising the transaction only recognised the Dangote refinery as the only petrol-producing refinery when the deal started.

Last year, Idoko disclosed that many of the modular refineries have been facing serious crude challenges, preventing them from producing fuel. He noted that some refineries with 10,000 capacity currently produce a little above 3,000 barrels per day due to the unavailability of crude oil.

“A 6,000-capacity refinery now produces 1,000 barrels, but productions are off and on because of erratic crude supply. Our modular refineries are facing a serious crude crisis. Nothing has changed for modular refineries. There are talks with the government but there hasn’t been any definite arrangement for supplies,” he said.

Recently, the Nigerian Upstream Petroleum Regulatory Commission revealed that the Dangote refinery, the Port Harcourt refinery, and six others would need 770,500 barrels for daily fuel production.

NUPRC data sourced from the Nigerian Midstream and Downstream Petroleum Regulatory Authority puts the country’s refining capacity at 974,500 barrels per day. The NUPRC estimated that eight refineries would need 123.5 million barrels of crude oil in the first six months of 2025.

The refineries are: the Dangote refinery, Port Harcourt refinery, Warri refinery, Kaduna refinery, Opac refinery, Waltersmith refinery, Duport Midstream Company Limited, Aradel refinery, and Edo refinery.

According to the crude oil production forecast of producing oil companies and the refining requirement of functional refineries in Nigeria signed by the NUPRC Chief Executive, Gbenga Komolafe, the Dangote refinery is forecasted to need 550,000 barrels of a blend of Nigerian crude oil daily, 17.05 million barrels monthly, and 99.55 million barrels between January and June 2025.

Opac refinery requires 5,000bpd; Waltersmith needs 4,500bpd; Duport needs 2,000bpd while Edo refinery requires 1,000bpd. Others are Aradel refinery, 7,000bpd; Port Harcourt refinery, 60,000bpd; Warri refinery, 75,000bpd, and Kaduna refinery, 66,000bpd.

Marketers express skepticism

The Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, held that IOCs might not be able to sell in naira and was wondering how they would repatriate their funds.

According to him, though it is a good development if this is true, it may not be realistic.

“How can IOCs sell crude in naira to refineries? How are they going to repatriate their funds? I don’t think that assertions are correct. Will that domicile the money into their international currency at the end of the day?

“Though it is a laudable idea, I don’t know how achievable it is. These are international organisations and they must have to repatriate their money,” Ukadike stated.