US-Iran Conflict: Dangote Refinery to protect Nigerians from supply shocks

Dangote Petroleum Refinery and Petrochemicals has reassured Nigerians of its unwavering commitment to serving as a stabilising force amid recent shocks in the international oil market.

The conflict in the Middle East has led to the shutdown of some refineries and a cut in refinery production across the world. This is leading to a global scarcity of petroleum products. China has banned export of gasoline and diesel. 

In a statement on Thursday, Dangote Refinery said it will ensure Nigeria is insulated from these supply shocks by prioritising supply to the domestic market, citing it as one of the many benefits of domestic refining.

The conflict has driven global crude and freight prices sharply higher, with benchmark Brent prices rising by about 26 per cent within a short period to above $84.0 per barrel. 

In response, the refinery said it had implemented a N100 per litre adjustment to the ex-depot price of Premium Motor Spirit, representing an increase of about 12 per cent. It said it has also absorbed 20 per cent of the cost escalation, for now, to cushion the domestic market. “This is despite continuing to source crude at prevailing international market prices, whether purchased locally or from foreign suppliers,” it said.

“It is worth noting that Nigerian crude oil is more expensive than the Brent benchmark price by $3 to $6 per barrel. After adding freight of $3.50 per barrel, crude oil will be landing in our tanks between $88 and $91 per barrel. For context, crude oil was landing in our tanks at about $68 per barrel when our ex-depot price was N774/litre. 

“Furthermore, while we receive about five cargoes a month from NNPC, which we pay for in Naira, these cargoes are priced at international market prices + Premium and fall short of the 13 cargoes which we require to support sales into Nigeria. We therefore end up procuring foreign exchange at open market rates to pay for crude cargoes purchased from local and international traders.”

Dangote Refinery said the high crude cost is compounded by the fact that Nigeria’s upstream producers have failed to supply crude oil to the refinery as required under the PIA, “forcing us to source a substantial portion through international traders who charge an additional premium.”

It said that as a private enterprise operating in a deregulated environment, it has remained responsive and has made significant sacrifices by aligning pricing with market realities to ensure sustainability, particularly as it sources all its crude at prevailing international market prices, whether locally or from foreign suppliers. “Selling below cost would undermine its ability to procure crude, sustain production and guarantee uninterrupted supply to Nigerians,” it said.

The refinery said that despite these pressures, local refining at this scale continues to reduce exposure to international supply disruptions, moderate foreign exchange demand, and protect the country from severe shortages during periods of global instability.

“The refinery is also accelerating deployment of Compressed Natural Gas-powered trucks to cushion the impact of global shocks, enhance nationwide distribution efficiency, reduce logistics costs and improve delivery timelines across the downstream sector. The rollout is scheduled to commence this month.

“We remain committed to transparency, operational excellence and the long-term objective of securing sustainable energy security and stability for Nigeria at an affordable cost,” the refinery said.