FOLLOWING the recent debate on the landing cost of imported fuel being cheaper than Dangote Refinery’s gantry price, one of the industry’s stakeholders and former Chairman, Major Energies Marketers Association of Nigeria (MEMAN), Mr Adetunji Oyebanji, has explained that product specifications determine the price.
According to him, Dangote gantry price is higher, because it is producing higher product specifications for export.
To be able to export product to Europe and the United States, he said that specifications must be of higher standards to what are allowed by import to Nigeria.
Oyebanji pointed out that imported fuel is cheaper because the specification is not the same, but that the product specification must be in conformity with the Nigerian law.
‘Difference in price depends on specifications. I believe that Dangote is producing higher specification because it has to export. And the export specification to be able to export to Europe and US, is a higher standard to what is allowed by import into Nigeria.
‘So by definition, it is cheaper. It shouldn’t be but that is what it is. It’s cheaper probably, the product spec is not the same. But that is what the Nigerian law required,’ Oyebanji said.
‘The second thing is that import is not allowed on a whole scale, but on certain specifications. Also, there are export specifications to places,’ he said.
He argued that if the Nigerian government should allow more import, such decision will force Dangote to reduce price.
‘If you allow more import, it will force Dangote to reduce price. But because of low import, Dangote, being the dominant in the market, will be the one dictating the price. The only thing that can bring price down is regular competition in the market,’ he said.
Before the last reduction, Dangote Refinery gantry price was higher than imported fuel landing cost, according to data from the Energy Bulletin of Major Energies Marketers Association.
On June 02, data from MEMAN revealed that the landing cost was N1,118.75 per litre while the gantry price of Dangote Refinery was N1,250 per litre.
The data showed that the landing cost of diesel was N1,470.38 per litre; the gantry price of diesel for Dangote Refinery was N1,700 per litre. Landing cost of ATzIK was N1,426.24 per litre while Dangote’s gantry price was N1,650 per litre.
Meanwhile, Nigeria reverted to being a net importer of petrol in May, after imports surged to the highest level in four months, highlighting the country’s continued dependence on foreign fuel supplies, despite the presence of Dangote Refinery.
According to Argus Media, new market data showed that petrol deliveries into Nigeria averaged 57,000 barrels per day in May, while exports stood at 23,000 barrels per day. The development reversed the country’s net export position recorded in March and April, when local supply exceeded imports.
Industry data indicated that the increase in imports was largely driven by maintenance activities at the 700,000 barrels-per-day Dangote Refinery in Lekki.
The refinery’s Residual Fluid Catalytic Cracker (RFCC), a critical unit responsible for gasoline production, underwent maintenance during the month, affecting output and creating the need for additional fuel imports.
The temporary reduction in local production prompted marketers and refiners to source more petrol from Europe, which supplied Nigeria’s entire import requirement in May. Norway emerged as the largest supplier, followed by Italy and France.
Data also showed that both the Nigerian National Petroleum Company Limited and Dangote Refinery participated in fuel imports during
the period. NNPC imported approximately 11,000 barrels per day, while Dangote accounted for 27,000 barrels per day. The figures underline the unusual situation in which the refinery remained both the country’s largest producer and one of its biggest importers of petrol.
The increase in imports came after the Nigerian Midstream and Downstream Petroleum Regulatory Authority approved substantial import allocations for the second quarter of the year.
Report has it that no fewer than six independent marketers received permits to import petroleum products to support domestic supply.