As the Dangote Petrochemical Refinery prepares to introduce Premium Motor Spirit (PMS), commonly known as petrol, to the Nigerian market in the coming weeks, petroleum marketers are voicing concerns about potential price increases. These apprehensions stem from the refinery’s challenges in securing local feedstock from international oil companies (IOCs), forcing it to import crude oil at higher costs.
Key Points:
- Dangote Refinery faces challenges in sourcing local crude oil.
- Marketers worry about the impact on petrol prices.
- Government intervention sought to assist with crude oil supply.
- Potential effects on market competition and pricing
Crude Oil Supply Challenges
The 650,000 barrels per day capacity refinery has been importing crude oil from the United States and other countries due to difficulties in obtaining feedstock locally. This situation has already affected the pricing of its diesel and aviation fuel products, making them less competitive in the local market.
Hammed Fashola, National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed concerns about the impact of crude oil imports on production costs and, consequently, the ex-depot price of Dangote’s PMS.
“The non-supply of crude is a big challenge for Dangote,” Fashola stated. “When he keeps bringing crude oil from the United States, that is another cost. We are scared this will still boil down to the high cost of gasoline, unlike if he could source the crude locally in Nigeria.”
Government intervention and market expectations
Stakeholders are calling for government intervention to assist Dangote Refinery in securing local crude oil supplies. This move, they believe, could help address fuel availability and affordability issues faced by Nigerians.
Fashola suggested, “If Dangote can get an adequate supply of crude oil locally, I think the whole problem will be solved somehow. I don’t think there will be any need for anybody to go and bring in petrol again, especially if Dangote is selling at a reasonable price.”
Market competition and pricing concerns
While the introduction of Dangote’s petrol is expected to impact the market, there are concerns about potential monopolization. Marketers emphasise the need for fair pricing to maintain healthy competition.
“Dangote should be sincere, and the government should support him,” Fashola added, urging the refinery to avoid monopolistic practices.
Olufemi Adewole, Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), stated that the price of Dangote’s petrol would ultimately depend on crude oil procurement costs.
International Oil Companies’ Role
Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, has accused IOCs of deliberately frustrating the refinery’s efforts to buy local crude by inflating prices.
“The IOCs are deliberately and willfully frustrating our efforts to buy the local crude,” Edwin claimed. “It seems that the IOCs’ objective is to ensure that our petroleum refinery fails.”
Conclusion
As the Dangote Refinery prepares to enter the Nigerian petrol market, stakeholders are closely watching how supply chain challenges and market dynamics will influence pricing and availability. The success of this venture could significantly impact Nigeria’s fuel industry and economy, potentially reducing the country’s reliance on imported refined products.