- Firm explains PMS pricing amid soaring global crude oil price
Dangote Petroleum Refinery & Petrochemicals yesterday laid bare the cost of its crude oil purchase, insisting that products sourced locally and international by the refinery are paid for in dollars and dollar equivalent in naira.
The Refinery, in a statement, explained that Nigerian crude oil, that is Bonny Light, is more expensive than the Brent which as at yesterday sold at $85 per barrel.
“It is worth noting that Nigerian crude oil is more expensive than the Brent benchmark price by $3 to $6 per barrel. After adding freight of $3.50 per barrel, crude oil will be landing in our tanks between $88 and $91 per barrel. For context, crude oil was landing our tanks at about $68 per barrel when our ex-depot price was N774/litre.
“Furthermore, while we receive about five cargoes a month from NNPC which we pay for in Naira, these cargoes are priced at international market prices + Premium and fall short of the 13 cargoes which we require to support sales into Nigeria. We therefore, end up procuring foreign exchange at open market rates to pay for crude cargoes purchased from local and international traders.
“The high crude cost is compounded by the fact that Nigeria upstream producers have failed to supply crude oil to the refinery as required under the PIA, forcing us to source a substantial portion through international traders who charge an additional premium,” the statement from the Dangote Refinery said.
It explained that the ongoing conflict in the Middle East has led to the shutdown of some refineries and cut in refinery production across the world. This, it explained, is leading to a global scarcity of petroleum products. The effect of this is that global crude and freight prices have soared sharply higher, with benchmark Brent prices rising by about 26 per cent within a short period to above $84 per barrel, even as countries like China has banned export of petrol and diesel.
According to the statement, Dangote Refinery will ensure that Nigeria is insulated from these supply shocks by prioritising supply to the domestic market. This, it further explained, is why in responding to the development, the refinery implemented a measured adjustment of N100 per litre in its ex-depot price of Premium Motor Spirit, or petrol, representing an increase of about 12 per cent.
“The refinery has absorbed 20 per cent of the cost escalation, for now, to cushion the domestic market. This is despite continuing to source crude oil at prevailing international market prices, whether purchased locally or from foreign suppliers. This is one of the many benefits of domestic refining,” Dangote Refinery said.
The firm however reassured Nigerians of its unwavering commitment to serving as a stabilising force amid recent shocks in the international oil market now being experienced as a result of the ongoing face-off between Iran, US and Israel which has led to rising oil price.
As a private enterprise operating in a deregulated environment, the firm said it has remained responsive and has made significant sacrifices by aligning pricing with market realities to ensure sustainability, particularly as it sources all its crude oil at prevailing international market prices, whether locally or from foreign suppliers.
Despite these pressures, local refining at this scale, it further said, continues to reduce exposure to international supply disruptions, moderate foreign exchange demand and protect the country from severe shortages during periods of global instability.
“Selling below cost would undermine our ability to procure crude, sustain production and guarantee uninterrupted supply to Nigerians,” the statement said, assuring that it remains committed to transparency, operational excellence and the long-term objective of securing sustainable energy security and stability for Nigeria at an affordable cost.
It assured that the refinery is also accelerating deployment of Compressed Natural Gas-powered trucks to cushion the impact of global shocks, enhance nationwide distribution efficiency, reduce logistics costs and improve delivery timelines across the downstream sector.
Dangote refinery last week raised the ex-depot price by N100 following the Middle East crisis. It moved the price from N774 to N874 per litre ex-depot.
Petrol per litre in Lagos and other cities at the pump now sells for more than N900.