NNPCL May Reduce Crude Oil Supply To Dangote Refinery As Old Plants Resumes Operations

A report has indicated that the Federal Government might cut its crude oil supply to the Dangote Petroleum Refinery, reducing it from the current allocation of 300,000 barrels per day.

According to Punch, the reduction is expected to take place as part of adjustments under the government’s naira-for-crude initiative following the coming onstream of the Warri and Port Harcourt refineries.

Both refineries currently operate at a combined capacity of about 135,000 barrels per day and that would affect the supply to Dangote Refinery except if there is a surge in Nigeria’s oil output.

The plants, managed by the Nigerian National Petroleum Company Limited (NNPCL), commenced operations recently after years of neglect by successive governments.

It was gathered that the planned reduction of crude to the Dangote refinery was also predicated on the necessity to ensure a sufficient supply of crude to all refineries.

A source who spoke to the to the aforementioned publication said, “It is clear that crude allocation to Dangote refinery and other local refineries will be reduced because all our refineries are coming back. Old Port Harcourt is working. New Port Harcourt is almost done. Warri just joined last week.“

Similarly, other refineries with lower capacity were scheduled to receive allocations.

Findings showed that the $20bn Lekki-based plant was allocated about 300,000 barrels per day out of the 450,000bpd approve by the government.

The source stressed that the only solution to the impending crude supply cut was for oil production to improve.

The official added, “Warri is now onstream, too, and Kaduna is coming. So the current share of those 450,000 barrels will now be shared between all of them. Remember also that the BUA refinery is coming.

“So, it is very likely that the 300,000 barrels the Dangote refinery is getting currently will be reduced. The formula for how it would be shared is still sketchy, but it is almost certain that it would be reduced. NNPCL won’t deprive itself of crude oil.

“At least, if Port Harcourt will get 50,000 barrels. Other refineries’ share will be reduced to 250,000. New Port Harcourt will come. Warri, too, is still there. So the only solution to this thing is to increase production, which the government is working hard on.”

The government had redirected crude allocation of 445,000 barrels formerly disbursed to the Warri, Kaduna, and Port Harcourt refineries following their shutdown to the Dangote refinery.

The official also stated that the government has stopped selling its crude on credit to local refineries for improved revenue collection.

“Another issue now is that the government will no longer sell its crude on a credit basis. You would have to pay before you can pick up crude products. The refiners are not happy about it, but revenue to the government is also important,” he added.

The Dangote refinery may fall back on crude oil import, which is subject to international pricing.