NNPC Ends Imports, Partners with Dangote Refinery to Save $10B

On Monday, November 12, 2024 In a historic shift for Nigeria’s oil sector, the Nigerian National Petroleum Company Limited (NNPC) has officially ended its decades-long practice of importing petroleum products. This move is expected to save the country as much as $10 billion in hard currency annually, marking a major step toward energy self-sufficiency.

NNPC will now source its refined petroleum products directly from the Dangote Petroleum Refinery, located in Lagos, which processes 650,000 barrels of crude oil per day. Group Chief Executive Officer of NNPC, Mr. Mele Kyari, made the announcement while delivering a keynote address at the ongoing 42nd Annual International Conference and Exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos.

“This is a game-changer for Nigeria’s energy economy,” Kyari said, adding that the shift would allow the national oil company to entirely rely on domestic refining and eliminate the need for costly imports. He further highlighted that the NNPC’s new procurement strategy would boost Nigeria’s foreign reserves, as the country no longer needs to spend billions on imported fuel.

The announcement also comes with positive news from the Independent Petroleum Marketers Association of Nigeria (IPMAN), which revealed it had struck a deal to buy petroleum products directly from the Dangote Refinery, bypassing the NNPC as a middleman. This new agreement ends the previous arrangement where independent marketers had to buy products from NNPC, a practice they had long opposed.

Kyari noted that the decision to buy from Dangote Petroleum Refinery was driven by the provisions of the Petroleum Industry Act (PIA) 2021, which mandates oil producers to supply crude oil to domestic refineries. NNPC’s four refineries are slated to return to production soon, and Kyari reiterated that all oil producers in Nigeria are obligated to supply crude to these refineries once operational.

In his address, Kyari stressed that the NNPC was fully committed to supporting local refineries and rejected claims that the national oil company was sabotaging the local refining sector. He emphasized that NNPC’s partnership with Dangote Refinery was not just a business decision but a strategic move to ensure long-term market stability.

“We see this as a clear opportunity. It’s a well-informed business decision for us to supply crude to domestic refineries. From day one, we knew it was in our best interest to do so,” Kyari explained. “We don’t need to be persuaded. We are already doing this.”

Kyari also responded to concerns regarding the pricing of Nigerian crude, explaining that the country’s oil is a premium product that commands a higher price on the global market. He assured that the NNPC would continue to supply crude to local refineries, not only in line with the law but also to protect the country’s economic interests.

“I believe that we must process all the crude that we produce in the country to its fullest extent,” he said. “And today, NNPC does not import any product. We are taking wholly from the domestic refinery.”

Kyari further addressed the issue of crude sales in naira, stating that such arrangements would not affect the value of Nigeria’s oil. He explained that the removal of foreign exchange considerations would instead strengthen the country’s local currency and economy. 

“This is a net-zero game. Whether you sell in naira or in foreign exchange, it makes no difference as long as the products are sourced locally,” he said.

Kyari also reminded oil producers that they are required by law to support domestic refineries, as per the Domestic Crude Oil Obligation (DCOO). He clarified that this obligation is not limited to NNPC but applies to all oil producers in the country.

In addition to these developments, Kyari provided updates on NNPC’s efforts to strengthen the country’s gas infrastructure. He revealed that NNPC was working to expand the use of Compressed Natural Gas (CNG), with plans to establish at least 12 mother CNG stations by the first quarter of 2025. Additionally, NNPC is constructing a mini Liquefied Natural Gas (LNG) plant to support the growing demand for natural gas in the domestic market.

Also speaking at the conference, the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Gbenga Komolafe, confirmed that Nigeria’s oil production had risen to 1.8 million barrels per day, with projections to reach 2 million barrels per day by December. He also assured that the commission was actively working to increase production through the Project 1 Million BPD initiative.

Komolafe also addressed concerns regarding the exit of International Oil Companies (IOCs) from Nigeria, clarifying that the multinationals were only rationalizing their portfolios in response to the changing energy landscape.

Meanwhile, the leadership of IPMAN, following a meeting with Aliko Dangote and his management team, announced that members would now be able to buy petrol, diesel, and kerosene directly from the Dangote Refinery. This development promises to ensure a steady supply of petroleum products across Nigeria at more affordable rates.

IPMAN’s National President, Abubakar Shettima, encouraged all members to support the Dangote Refinery, emphasizing its role in supporting Nigeria’s economic goals and reducing dependence on foreign oil imports. He also called on the federal government to accelerate its plans to promote CNG usage in the country, an initiative that has the potential to rejuvenate Nigeria’s economy.