July 23, 2024

NNPC in 20 years “right to first refusal” agreement with Dangote Refinery

Olubunmi Martins

The Nigeria National Petroleum Company Limited has confirmed a two-way transactional relationship with the Dangote Refinery’s 650,000 bpd facility, under a strict contractual agreement including the option to exercise the ‘Right of First Refusal “

The Group Managing Director of the NNPC Limited, Mele Kyari made the disclosure at the 49th session of the State House Ministerial Briefing held at the Presidential Villa, Abuja.

In detail , the National Oil Company said it will provide crude oil supplies to the refinery in exchange for finished petroleum products over a period of 20  years through a contractual arrangement that will be strictly toy binding.

He said, “We have secured the right to sell up to 300,000 barrels of crude oil to the Dangote refinery for the next 20 years. Not only that, by right, we also have access to 20 per cent production from that plant,”

The NNPC boss said the arrangement is a deliberate plan to guarantee the free flow of petroleum products into the Nigerian market from the refinery when it begins operation.

Critical details of the arrangement on the cost of crude supplies,  pricing template and key economic factors are yet to be disclosed.

The Dangote Refinery located within the Free Trade Export Zone is permitted by regulations  to export its products freely and at economic prices.

EnergyDay checks  revealed that the refinery has been receiving offers from market operators within the West African region and may not be willing for economic reasons to commit al, of its throughput capacity into the Nigerian market,

The Dangote refinery on completion is expected to produce a mix of petroleum products  which includes Aviation Fuel, Gasoline, Kerosene, Diesel, Polypropylene, LPG, Sulfur and Low Pour Fuel Oil.

Energy Analyst, David Adebayo explained that the participatory interest of  NNPC Limited in the Dangote Refinery could help to safeguard economic supply of feedstock into the refinery, and in turn, protect Nigeria’s crude oil sales market as the country navigates more carefully into the era of cleaner fuels.

Aliko Dangote , who is also the operator of OML’s 71 and 72 is  on the verge of completing field development of these assets that will provide 100,000 barrels of crude oil daily output.

EnergyDay checks can confirm that initial production of 20,000 bpd from OML 71 could begin at about the same time as the Refinery’s commissioning.

‘I think it’s a win-win arrangement for Aliko Dangote’ Engr Adebayo said ‘He’s on both sides of the table and could conveniently expand further into other value chain opportunities ‘

NNPC Limited , in its official statements have said that it will play a dominant role in the country’s downstream sector as a strategic device to protect the country’s energy security but the company is also required to function as a profit making entity in a competitive market environment.