Dangote Group has falsely claimed that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) admitted that “they will be unable to enforce the domestic crude supply obligation”.
The claim by Dangote Group came after the NUPRC revealed that over 29 million barrels of crude oil had been supplied to the Dangote Petroleum Refinery and Petrochemicals in the first half of 2024 in line with Section 109 of the Petroleum Industry Act 2021.
“The NUPRC has effectively admitted in their statement, that they will be unable to enforce the domestic crude supply obligation as specified in the PIA citing “sanctity of contracts” as an excuse,” Group Chief, Branding and Communications Officer Anthony Chiejina said.
But contrary to Dangote’s claim, the commission in a statement on Friday explained that in the bid to ensure energy security and crude oil supply to local refiners, it developed and gazette Regulation of the Production Curtailment and Domestic Crude Oil Supply Obligation (DCSO) Regulation 2023.
On several occasions, the regulator has also engaged Dangote and local refiners to ensure their supply quota is met in line with the provisions of the PIA.
The NUPRC also took additional steps by establishing a working committee comprising of NUPRC, Oil Producers Trade Section (OPTS), the Independent Petroleum Producers Group (IPPG), Crude Oil Refinery-Owners Association of Nigeria (CORAN) and NUIMS.
This, the commission believes, would facilitate effective implementation of the DCSO.
In order to protect domestic refiners, the NUPRC said it would ‘apply extreme penal measures’ against producers who fail in their obligations. However, the PIA also mandates local refiners to fulfill their part of the bargain.
To enforce the DSCO, the commission said, “In the pursuit of its mandate, if it becomes necessary for the NURC to withdraw licenses, the commission will do so but it will not resort to the ‘presumptuous and arbitrary’ withdrawal of licenses because of ‘Sanctity of Contract.’
“However, the regulator as a subject matter expert is of the opinion that arbitrary revocation of licenses is not in the best interest of the country particularly in the era of low investment arising from the onslaught in energy transition.”
The NUPRC also said arbitrary revocation of licenses will be counter productive, especially in the period where President, Bola Ahmed Tinubu, has been vacating entry barriers to investment in oil and gas sector and introducing incentives to attract investments.
Dangote’s recent fight against oil and gas industry players may be an attempt to operate like a monopoly in the oil and gas sector, according to the Chief Executive Officer of Matrix Energy, Abdulkabir Adisa Aliyu.
“Monopoly kills business, and when people invest without doing the needful, that is when you see them accusing everybody. Today Nigerians are crying that the prices of foodstuff are high, while somebody published the result of his business, making over N133bn in six months and it is coming from sugar,” Aliyu warned.
Sources familiar with the matter told THE WHISTLER that Dangote Refinery also has operational issues which is also limiting the firm’s ability to access crude oil.
The source who does not want to be mentioned said that often times, some refiners have operational issues that could result in a situation where the volume hits ‘tank top’- a level at which they have to shut the terminal.
According to the source, occasionally, Dangote has failed to put his letter of credit timely and does not fix vessels when he is supposed to. The source said sometimes, the terminals have to go down due to the underlying issues.
Recall that Fitch Ratings downgraded Dangote Industries Limited’s creditworthiness due to “significant deterioration in the group’s liquidity position following lower-than-expected disposal proceeds.”
The global rating institution placed Dangote’s ratings on a negative watch and lowered the company’s national long-term rating to B+(nga) from AA(nga).
A negative watch in credit ratings indicates that a company’s ability to repay may be deteriorating1. It is a signal that the company’s outlook is not stable and there may be increased risks, according to Investopedia.
Fitch said, “Lack of tangible steps to refinance or repay the maturing debt would lead to further downgrade while we do not expect a positive rating action until the company’s liquidity position improves substantially.”
More Troubles For Dangote Refinery As Firm Delays Letter Of Credit To Oil Producers is first published on The Whistler Newspaper