Dangote: Local crude must be available, competitively priced

Dangote Petroleum Refinery and Petrochemicals has said the success of Nigeria’s domestic refining ambitions depends on reliable access to locally produced crude oil at commercially competitive prices, warning that expensive domestic supplies could undermine refinery economics and ultimately raise the cost of petroleum products.

The refinery’s position comes amid controversy over data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showing that Dangote Refinery rejected 15.5 million barrels of crude offered by domestic producers in the second quarter of 2026.

The company, however, said the central issue was not the volume of crude offered under the Domestic Crude Supply Obligation (DCSO), but how much crude was actually available for purchase at prices that make commercial sense.

Group Vice President, Oil & Gas and Fertiliser, Dangote Industries Limited, Devakumar Edwin, said the refinery remained willing to buy Nigerian crude but could not sustainably operate on supplies priced above international market benchmarks.

“Our position is straightforward. We are ready and willing to purchase Nigerian crude oil, provided it is available in sufficient volumes and at competitive market prices,” Edwin said.

He said the refinery had consistently faced difficulties securing adequate crude directly from Nigerian producers, forcing it to source significant volumes through International Oil Companies (IOCs) and other third parties.

The reliance on intermediaries, according to Dangote, introduces additional premiums and transaction costs that can make Nigerian crude more expensive than alternative supplies available on the international market.

Edwin said some domestic crude had recently been offered to the refinery at prices significantly above prevailing international benchmarks published by pricing agencies such as Platts and Argus.

“When additional layers of intermediaries introduce premiums, the cost of crude acquisition increases significantly, affecting the overall economics of domestic refining. Ultimately, higher crude costs translate into higher costs of refined petroleum products for the local market,” he said.

The issue has broader implications for Nigeria’s energy security and foreign exchange position because the economic benefits expected from expanding domestic refining depend heavily on ensuring that refineries can obtain sufficient feedstock at sustainable prices.

A refinery operating below capacity because of inadequate crude supplies loses the opportunity to convert locally produced crude into petrol, diesel, aviation fuel and other products for the domestic market, while Nigeria remains exposed to the cost and foreign exchange requirements associated with importing refined products.

Dangote said it supports the objectives of the DCSO framework, which was introduced to ensure that crude produced in Nigeria supports domestic refining, but argued that the mechanism must operate transparently and commercially if it is to achieve its intended purpose.

The company said that, since implementation of the DCSO, it had concluded negotiations for only a limited number of cargoes, excluding supplies received under NNPC term contracts.

In some instances, it said, crude cargoes designated for domestic refining had already been committed to other buyers before negotiations with the refinery began, further limiting the volume available for purchase.

Dangote also raised concerns about provisions of the Petroleum Industry Act that allow counterparties to withdraw from negotiations without what it described as a structured review process or adequate safeguards.

According to the refinery, such uncertainties weaken the effectiveness of the domestic crude supply mechanism and make it more difficult for local refiners to plan operations and secure reliable feedstock.

The dispute highlights a central challenge facing Nigeria’s ambition to become a net exporter of refined petroleum products: having refining capacity is not enough if commercially viable crude supply cannot be guaranteed.

For Dangote Refinery, the economics of the operation ultimately depend on the cost and reliability of its feedstock. Crude purchased at a significant premium can erode the advantage of refining locally, particularly when the alternative is to source competitively priced crude from international markets.

Edwin said the refinery’s objective was therefore not to avoid Nigerian crude but to secure it under terms that would allow the plant to operate sustainably and deliver petroleum products at competitive prices.

He said reliable domestic crude supply would enable Nigeria to maximise its refining capacity, reduce dependence on imported petroleum products, conserve foreign exchange and retain more value from the country’s oil resources within the domestic economy.

The development therefore places the DCSO at the centre of Nigeria’s broader effort to link its upstream oil production with the rapidly expanding domestic refining sector.

The policy’s effectiveness will ultimately depend on whether producers and refiners can move beyond nominal crude allocations to a supply system in which sufficient volumes are actually delivered at transparent, market-reflective and commercially sustainable prices.

For Nigeria, the stakes extend beyond the interests of a single refinery. A failure to establish a reliable domestic crude-to-refining supply chain could limit the economic benefits of the country’s investment in refining capacity, while a commercially viable system could strengthen energy security, reduce fuel import dependence and improve the value captured from Nigeria’s crude oil resources.