Following the Federal Government’s announcement of the naira-for-crude deal, three additional refineries are preparing to start producing Premium Motor Spirit (PMS), commonly known as petrol. These refineries are the Clairgold refinery in Delta State with a 20,000-barrel capacity, Azikel refinery in Bayelsa with a 12,000-barrel capacity, and the Aradel refinery in Rivers State with an 11,000-barrel per day capacity.
This development comes after confirmation from officials at the Dangote refinery in Lagos and operators of other domestic refineries that, though the naira-for-crude deal has begun, crude oil supply to Africa’s largest refinery is expected this week.
On Saturday, the Federal Government announced it had commenced sales of crude oil and refined products in naira. The Federal Ministry of Finance confirmed this in a post on its X handle, stating:
“The Minister of Finance and Coordinating Minister of the Economy announced that, in line with the Federal Executive Council directive, the sale of crude oil and refined petroleum products in naira has officially commenced as of October 1, 2024.
“Following a meeting of the Implementation Committee, chaired by the Minister of Finance on October 3, 2024, to conduct a post-commencement review of the Crude Oil and Refined Products Sales in Naira initiative, the commencement of this strategic initiative was affirmed by key stakeholders.”
Officials at the Dangote refinery reacted positively, expressing hope that crude would arrive at the plant this week, barring unforeseen circumstances. A senior source at the refinery stated, “The deal is still a work in progress, and I’m sure that by this week, the committee should be done with it.”
The official added that: “nobody will say crude has arrived anywhere now.” He added, “As of Friday, discussions about it were still ongoing. But I’m sure there will be a complete picture by this week. However, the whole thing is okay. It is a good signal about the crude oil supply in naira.
“And I can assure you that once the first cargo delivers the crude, I’ll send you a picture of it so that you’ll confirm that the deal has been completed. It is also for record purposes. You should have documents and photographs to show the first supply for such deals, having dates and possibly time of arrival.”
Another source disclosed that the initial phase of the naira-for-crude deal would last for six months. “The deal is for six months in the first instance. People shouldn’t think it is forever. This is a dollar-based business, so supplying it in naira, though at the equivalent dollar rate, is significant. The President should be commended for this. Otherwise, the local crude would have been purchased from foreign-based traders who often mark up their prices, affecting the cost of producing refined commodities whether in Nigeria or elsewhere,” the official added.
The Crude Oil Refinery Owners Association of Nigeria and the Petroleum Retail Outlet Owners Association of Nigeria welcomed the government’s announcement but called for more transparency. PETROAN President Billy Gillis-Harry stated:
“The details of this agreement are not known yet, but we hope that the intricacies will be revealed to the public because this business is the central value of everything that happens in our economy. PMS is key, and the pricing of crude is important as it determines the price of the commodity. It will be a great thing for us to know the details and its implementation. However, we are happy with the deal and congratulate everyone involved.”
In September, the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency announced that the Federal Executive Council had approved the sale of crude to local refineries in naira. The NNPC would supply approximately 385,000 barrels per day to the Dangote refinery starting October 1, with payments made in naira.
According to the Federal Government, this initiative would reduce pressure on the naira, eliminate unnecessary transaction costs, and improve the availability of petroleum products. It also stated that in return for the crude, the Dangote refinery would supply PMS and diesel of equivalent value to the domestic market, with all transactions conducted in naira.
Modular Refineries’ Role
In line with the naira-for-crude initiative, three modular refineries are gearing up to join Dangote in PMS production. These are the Clairgold, Aradel, and Azikel refineries, all in various stages of readiness. Previously, modular refineries focused on producing diesel, but plans are underway for upgrades to accommodate PMS production.
From 2015 to 2019, Nigeria’s refineries could only produce 1.46 billion litres of petrol due to low refining capacity, according to the National Bureau of Statistics. Between 2020 and 2023, the country only produced diesel and kerosene, with 109.39 million litres of diesel produced in 2023, reflecting a modest increase over the previous year.
Industry experts revealed that producing PMS requires additional investment in catalytic reformers, costing around $60 million per refinery. Some refineries, like Aradel, are undergoing upgrades to accommodate this, while others like Clairgold are exploring alternative technologies like isomerisation.
Dangote Petrol Update
Meanwhile, documents obtained from the NNPC show that between September 15 and 30, 2024, 102.9 million litres of petrol were lifted from the Dangote refinery. However, this was short of the planned 400 million litres, with only 2,207 out of 3,621 trucks successfully dispatched.
The NNPC had earlier announced that the Dangote refinery would supply 25 million litres of petrol daily, starting in September. The product, priced at N898.78 per litre, is sold at rates above N1,000 per litre in northern states such as Borno and Sokoto, with prices in Abuja and southern regions slightly lower at around N960 per litre.
NNPC remains the sole off-taker of PMS from the Dangote refinery, with 56 trucks loaded on the first day, carrying 2.49 million litres of petrol. Despite challenges in meeting the target, the government is focused on ensuring smooth fuel distribution across the country.
