Government approval delays Dangote refinery fuel

Indications have emerged that lingering regulatory approvals have stalled Dangote Petrochemical Refinery’s plan to release aviation fuel (Jet A1) and diesel for sale in the Nigerian market in January, findings by The PUNCH have shown.

One week after the January 31 timeline set by the management of Africa’s largest refinery to begin the sale of its petroleum product in the local market, the refinery is still battling to cross the hurdles of the several layers of regulatory approvals.

The development came almost a month after the refinery began the production of petroleum products at the expansive facility.

On January 12, 2024, Dangote refinery announced that it had commenced the production of Automotive Gas Oil, popularly called diesel, and aviation fuel or JetA1.

The President, Dangote Group, Aliko Dangote, in a statement issued by his firm at the time, thanked President Bola Tinubu for his support, encouragement, and thoughtful advice towards the actualisation of the project.

Dangote also thanked the Nigerian National Petroleum Company Limited, Nigerian Upstream Petroleum Regulatory Commission, NMDPRA and Nigerians for their support and belief in the historic project, as he revealed that the facility would pump out diesel and aviation fuel in January, subject to regulatory approvals.

He said, “We thank President Bola Tinubu for his support and for making our dream come true. This production, as witnessed today, would not have been possible without his visionary leadership and prompt attention to details.

“His intervention at various stages cleared all impediments thereby accelerating the actualisation of the project. We also thank the NNPC, NUPRC and NMDPRA for their support. These organisations have been our dependable partners in this historic journey.

“We also thank Nigerians for their belief and support in this project. We have started the production of diesel and aviation fuel, and the products will be in the market within this month once we receive regulatory approvals.”

The confirmed on Wednesday, February 7, 2024, the plant had yet to pump out diesel nor aviation fuel, amid an anxious wait by operators in the downstream sector and Nigerians consumers.

Findings showed major and independent oil marketers were keenly waiting for the sale of refined products from the $20bn Dangote Petroleum Refinery even though the January 2024 target for the release of fuel by the facility passed.

But multiple officials of regulatory agencies in the oil and gas sector revealed to The PUNCH on Wednesday that the facility had yet to complete the various stages of its regulatory processes.

It was gathered that officials of the Nigerian Midstream and Downstream Petroleum Regulatory Authority were still assessing the products being produced by the plant before the agency would issue regulatory approvals for the products’ release into the market.

Approval delayed

Multiple sources at both the Abuja headquarters and Lagos regional office of the NMDPRA, the regulator of Nigeria’s midstream and downstream oil sector, confirmed that the process for the release of regulatory approvals was still ongoing.

“Definitely before any release of products is made, approvals must have been granted and this is being worked. The appropriate department is working out the approvals.

“We cannot tell you exactly what these approvals consist of. But the fact is that for Dangote refinery to release products, the requisite approvals must be granted, because the regulator needs to look at the quality of the products, whether they (products) meet specifications, etc, before they are being released to the market.

“So the approvals are being worked on. However, I cannot give you the date when it is going to be completed, but just know that the process is ongoing and I’ll brief you on an updated position,” an official, who pleaded not to be named due to lack of authorisation, stated.

Also, oil marketers told our correspondent that they had yet to receive the commercial terms for the supply of products from the facility, stressing that this was still being awaited.

“The commercial terms are still being sorted out and we are expecting that information from the refinery as well,” the Executive Secretary/Chief Executive Officer, Major Energies’ Marketers Association of Nigeria, Clement Isong, stated.

The PUNCH had reported on January 15, 2024 that the seven major oil marketers in Nigeria had registered with the Dangote Petroleum Refinery for the lifting and distribution of refined petroleum products produced by the $20bn plant.

The report stated that dealers under the aegis of the Major Oil Marketers Association of Nigeria (now MEMAN) confirmed that with the registration, they would commence the distribution of fuel produced from the facility once the commercial terms were sorted.

It further stated the Independent Petroleum Marketers Association of Nigeria also revealed that they met with the management of the Dangote refinery to discuss terms of product loading.

Similarly, the Petroleum Products Retail Outlets Owners Association of Nigeria stated that PETROAN had been engaging the management of the multi-billion dollar refinery for the supply of products from the facility.

The report outlined the seven major marketers to include 11 Plc, Conoil Plc, Ardova Plc, MRS Oil Nigeria Plc, OVH Energy Marketing Limited, Total Nigeria Plc and NNPC Retail.

IPMAN awaits Dangote

When also contacted to provide updates on their engagements with Dangote refinery, the National President, IPMAN, Abubakar Maigandi, said independent marketers were still awaiting feedback from the management of the facility.

He said, “We are still expecting the products from them, but up till now they have not called us for the distribution of products. We heard that this is because they are still undergoing the regulatory approval processes.

“So we are waiting. They have also not given us the cost of their products. When they give us the cost, of course, we are going to let you know.”

Officials of Dangote refinery, however, preferred not to comment on the issue, as they have yet to provide responses to enquiries on the matter.

Requests for comments spanning days had yet to be responded to as of the time of filing this report on Wednesday.

Dangote refinery, Africa’s biggest oil giant is located at the Lekki Free Zone in Lagos, and was inaugurated on May 22, 2023. It has a 650,000 barrels per day refining capacity, making it the world’s largest single-train refinery

The facility is to produce diesel, jet fuel, Premium Motor Spirit, popularly called petrol, polypropylene, among others.

The facility aims to meet 100 per cent of Nigeria’s refined petroleum needs, create jobs, and boost exports, as it sits on a massive 6,180-acre site and boasts the world’s longest subsea pipeline infrastructure (1,100km).

More jobs

It has its own 435 megawatts power plant, capable of supplying electricity to a major Nigerian city and the project is expected to create 135,000 permanent jobs in the region.

Dangote Group’s president described his refinery as a game-changer for Nigeria’s oil industry and a significant infrastructure development in Africa.

“This is a big day for Nigeria. We are delighted to have reached this significant milestone. This is an important achievement for our country as it demonstrates our ability to develop and deliver large capital projects.

“This is a game-changer for our country, and I am very fulfilled with the actualisation of this project,” Dangote stated in the statement issued by his firm on January 12, 2024.

The refinery has so far received six million barrels of crude oil at its two SPMs located 25km from the shore. The first crude delivery was done on December 12, 2023, and the 6th cargo was delivered on January 8, 2024.

On January 29, 2024, it was reported that the refinery was set to import crude oil from the United States in the coming months, as the $20bn facility intensifies moves to start pumping out refined products.

The report stated that Africa’s largest refinery’s move to import crude from the US was a sign of just how competitive American barrels had become in the global market.

The multi-billion dollar refinery, according to Bloomberg at the time, was also expecting two million barrels of crude oil from Trafigura Group in February.

The report stated that Trafigura Group sold two million barrels of WTI Midland to Dangote refinery for end-February delivery.

It said this was disclosed by traders with knowledge of the matter, adding that it was the first time that the giant refinery had purchased non-Nigerian crude.

Trafigura is a multinational commodity trading company headquartered in Singapore, with major hubs in various locations including Geneva, Houston, Montevideo and Mumbai. The group participates in the oil and petroleum products market.

They primarily trade in base metals and energy, including oil, and also other commodities like minerals and metals. They have activities involving US oil as a globally focused company.

Dangote refinery can load 2,900 trucks a day at its truck-loading gantries. The products from the refinery will conform to Euro V specifications, according to its management.

“The refinery design complies with the World Bank, US EPA, European emission norms, and Department of Petroleum Resources emission/effluent norms, employing state-of-the-art technology,” the firm stated.

Since the announcement by Dangote that the refinery had started producing aviation fuel and diesel, operators in the downstream oil sector have to continued to declare their readiness to distribute the commodities across the country.

For instance, when contacted and asked in January whether major oil marketers would be involved in the lifting of refined products from the Dangote refinery, or whether the facility would distribute the fuel itself, Isong, the MEMAN CEO, replied, “I confirm that we (major marketers) have met with him (Dangote).

According to Isong, all MEMAN members have registered with Dangote Petroleum Refinery to become marketers of its products. He had told The PUNCH that MEMAN members would have the product in their stations the moment it was available for sale.

“We have all registered with Dangote so that we call buy and sell. All my members are registered with Dangote. Whenever the product is ready and starts coming out, you will see it in our filling stations,” he said.

“I confirm that my members have registered with them. We were waiting for the production to start and now it has started and they will start discussing the commercial terms. So yes, major marketers and other players will buy for the market. The important thing was the registration.

“So now the commercial terms will be agreed with each marketer and then they will buy from them. There are several ways you can buy from them. They have loading ranks, over 90, so you can take your truck to go and pick. You can also use vessels to pick. Those are the two ways you pick products.”

Asked at the time to state how soon marketers would start picking products from the plant, Isong said, “I don’t know, but I know we started registration last year. So as soon as they say they are ready we will pick the products. Also as soon as the commercial terms are set, my members will pick.”

Former President Muhammadu Buhari inaugurated the Dangote refinery in May 2023. The facility missed its crude oil refining target a number of times due to the non-supply of crude to the plant by oil producers.

It, however, started receiving crude oil batches of one million barrels each in December 2023 and got the 6th batch of one million barrels of crude last month. Officials at the plant had explained that the refinery required six million barrels of crude to commence production.

Meanwhile, the MEMAN CEO had expressed excitement about the coming onstream of the refinery but stated that he could not tell what the pricing policy of the refinery would be.

“It should be the market price because you need to recover your cost, and capital, and repay your loans. I don’t know what the market price will be, but I know that with my international experience in the economics of petroleum, nobody does this business to make a loss,” he stated.

The prices of diesel and aviation fuel are fully deregulated commodities, unlike that of PMS, which has been a subject of debate on whether it is being subsidised or not.

But operators explained that the cost of crude oil would play a major role in determining the cost of fuel from Dangote refinery.

Credit: Punch