Pinnacle reacts
But Pinnacle Oil and Gas said that it is untrue the allegation by Dangote Industries Group that “an international trading company has recently hired a depot facility next to the Dangote Refinery, with the objective of using it to blend substandard products that will be dumped into the market to compete with Dangote Refinery’s higher quality products.”
Chief Executive Officer, Pinnacle Oil and Gas Limited, Mr. Robert Dickerman, in a statement said Pinnacle Oil and Gas Limited would never engage or attempt to import or distribute any off-spec or substandard product into the Nigerian market.
He added that the company has a reputation for integrity and regulatory compliance which is extremely important to it. Dickerman said: “Deregulated commodity markets work best with an open system of multiple sellers and multiple buyers bidding to establish the market price.
For Nigeria, to have supply options that include local refineries or imports is the mechanism that will establish the lowest sustainable prices.
A free market is also regulated to ensure that all products meet the country’s specifications and that all players behave responsibly.
“On November 3, 2024, Dangote Organisation issued a Press Release in which it alleged that ‘‘an international trading company has recently hired a depot facility next to the Dangote Refinery, with the objective of using it to blend substandard products that will be dumped into the market to compete with Dangote Refinery’s higher quality products.’’
He stated that Pinnacle Oil and Gas has the only depot facility next to the Dangote Refinery. He added that without equivocation, Pinnacle Oil and Gas would never engage or attempt to import or distribute any off-spec or substandard product into the Nigerian market.
According to him, the company has a reputation for integrity and regulatory compliance which is extremely important to them.
Speaking further during a media briefing, Dickerman said that the optimal solution to Nigeria’s energy security and pricing is a market-based solution that encourages all sources of supply, be they from local refineries, imports or any other source.
He stated that these suppliers must adhere to the strict specifications of the market and that products must be handled safely. Dickerman said: “On November 5, Dangote issued a Press Release titled, “Pinnacle Oil and Gas FZE: Our Stand.
“It is unfortunate and deeply concerning that this release contained several statements that are defamatory, inaccurate and intentionally misleading.
Further, it advocated a national policy that would cause severe economic damage to Nigerians by raising the cost of petrol above global market prices and higher than they are today.
“Pinnacle Oil and Gas built a revolutionary terminal in the Lekki Free Zone at great expense for the benefit of far greater efficiency in the distribution of petroleum products throughout Nigeria.
Prior to the Pinnacle terminal, all imported cargo had to be transferred to smaller vessels due to the shallow draft restrictions across Nigerian ports.
“This extra vessel charter, along with the associated costs of delay, has been inflating the delivered cost for many years. With the Pinnacle terminal, full cargoes can offload in less than 40 hours and sail away without any ship-to-ship transfer or delays.
This has been working extremely well for the country since operations began in 2021. “In our effort to further enhance distribution efficiency, we proposed and invested in pipelines to distribute petroleum products from the Dangote Refinery, as pipeline transfer is far less costly than distribution by ship or trucking across the country.
When we proposed this project to Dangote, they wholeheartedly agreed and signed a 13-year interconnection agreement with us. “In addition, Dangote facilitated our process of achieving regulatory approval by writing two Letters of No Objection to the regulator to enable our project to proceed.”
He stated that it is Pinnacle’s firm position, as well as the position of any educated economist or market watcher, that the optimal solution to Nigeria’s energy security and pricing is a market-based solution that encourages all sources of supply, be they from local refineries, imports or any other source. Dickerman stated that these suppliers must adhere to the strict specifications of the market and products must be handled safely.
He also stated that the consumer should be indifferent to the source of supply, as long as the product is good quality, and the price is the lowest attainable. He insisted that this solution demands competition.
Also, Dickerman stated that the Nigerian system of distribution could be more efficient, with working products pipelines and terminals near large demand areas, but given the infrastructure they have, it works quite well.
According to him, there are well over 100,000 people working in this sector in Nigeria, operating vessels to every working port, operating storage terminals, driving trucks to filling stations, operating retail stations and providing customer service.
Dickerman said: “The Dangote Refinery would be well advised to utilise this system and help keep prices at market levels, so the entire industry can avoid supply disruptions and price shocks.
There is no need or desire to re-create the distribution network where every truck must load at one point for the entire country.
“Our previous release made clear that imports do not equate to substandard or off-spec products, and there is no reason to believe that products refined in other countries would be of any lower quality than those refined here.
Again, the regulator and all market participants work in tandem to ensure that no substandard product is ever delivered to customers.
“We wish the Dangote Refinery well and expect that with all their options for sales and distribution, they will find it simple to compete at market pricing and make a healthy return for their investors.
This will encourage further investment in refining, storage and distribution to make Nigeria an efficient global trading hub, and an example for other markets around the world.”
NNPCL denies sabotage
Reacting to claims that NNPC Ltd is sabotaging the efforts of domestic refineries, the Group Managing Director, NNPC Ltd Mele Kyari, acknowledged that the company is part-owners of the Dangote Refinery.
According to him, such an investment is a strategic move aimed at strengthening domestic fuel supply. He said: “On domestic refining, there are a number of media stunts that you see around, around NNPCL and around while ‘NNPCL is now the saboteur of domestic refining.
That NNPCL is not willing to support domestic refining.’ That is very far-fetched and I must speak to it. “We are proud part owners of Dangote Refinery. No doubt about that.
We saw an opportunity that there is a clear market of at least 300,000 barrels of our production which we know that as times moves on, people will start struggling to find a market for their production. It will happen. It is already happening.” He added: “Oil is paramount.
People have choices and therefore we saw an opportunity to supply to the domestic refinery, not only Dangote but any other refinery that operates in the country. So it is a very informed business decision.
“Therefore from day one, we knew that it is to our benefit to supply crude oil to domestic refineries. So we do not need to be persuaded, we do not need anybody to talk to us. There is no need for any pressure from the street for us to do this. We are already doing this.”
He harped on the importance of domesticating crude oil. Kyari said: “we should never forget that Nigerian crude is ’Lamborghini crude’, if we choose that every product that we have in this country must come from domestic production, then we must deal with pricing.
Otherwise, out there in the global market, everybody buys Nigerian crude and blends it with dirtier crude to process, a lot of you will confirm this. So, no one takes Nigerian crude except one or two refineries that I know.
Straight processing of Nigerian crude, nobody does this, because you do have a gap in value if you do this. “Therefore, as a country, and I believe this strongly also, that we must process all the crude that we produce in the country to the optimum.
You can do intermediate products and sell to the market, you are still adding value. You don’t have to sell gasoline that is coming from Nigerian production. “You can do something different so you can process it domestically, but it’s going to be high quality.
As we all know and it’s very clear in the media that we are selling high-quality products, that’s very true but you need not do this. You are driving a KekeNapep and you want Lamborghini fuel, you do not need it.
So, the quality issue is a relative thing, it’s by geography, by location, and we will do everything possible to make sure that we domesticate this.
“Today, NNPCL does not import any product, we are taking only from domestic refineries. But I also know that we are working jointly with the government to make sure that we manage the issue around prices if we have to source all our supply from the domestic market.
It will be an issue and we are already resolving it. I can confirm that substantial work has been done and this will no longer be an issue.” The NNPC Ltd boss said that it is untrue that the company did not want to sell crude to refineries in Naira.
He stated that selling crude in naira and buying refined petroleum products in naira is a good and wise decision that will boost Nigeria’s economy. He noted that it will reduce much pressure of the naira pursuing the dollar.
Kyari said: “The other issue of how NNPC does not want to sell crude to a refinery in Naira. That is a form of sabotage. Far from it.
As a matter of fact, it makes no difference to us because if you sell crude to a domestic refinery in naira and you buy my product in naira, it is a debt zero game.
You lose nothing, you probably gain awesomely. But otherwise, whatever you do, you still have to source foreign exchange (FX) if you have to import. So you source in naira and you sell in naira, what you are doing is simply substitution.
“We must commend the President for bringing this initiative. What it will do to our country is that the biggest source of FX pressure on our country is import of PMS. It is the highest value.
That means if you can take that under control, it means that speculation around the naira to the extent of the FX that is required for domestic product supply will be eliminated.
That is speculation will go, you would have controlled inflation and FX because you would have settle the exchange rate for 50% “This is a very great initiative. We know for sure that this is a transition. We are learning from it.
But in the end we still know that this will be a major contribution to the stability of the naira exchange rate in our country. “Do not forget that we have domestic crude obligations. Everybody in the industry must contribute.
Once the NNPC refinery starts working, we will come to you and ask that you contribute to the supply of crude to this refinery. It is in the law. “This country is in a process of growth. There are two things that have happened.
Short term consequences but long term we are getting through a process and system where everybody is going through it. We have been around for a long time, I can tell you that every government avoided two things.
Having a single Windows for forex and taking out PMS subsidy or subsidy on petroleum products.”
Monopoly
The raging controversy also involved litigation as three major oil marketers in Nigeria prayed the Federal High Court in Abuja presided over by Justice Inyang Ekwo to stop Dangote Petroleum Refinery and Petrochemicals FZE, from monopolising the energy sector in Nigeria.
They pleaded the court that allowing Dangote to take over the oil sector would spell doom for the country. The marketers: AYM Shafa Limited, A. A. Rano Limited and Matrix Petroleum Services Limited.
Their position was contained in the reply they filed dated November 5, 2024, to challenge the competence of the suit marked: FHC/ABJ/CS/1324/2024, that Dangote’s company filed to nullify licenses they secured to import refined petroleum products into the country.
The suit also has the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and the Nigeria National Petroleum Company Limited (NNPC Ltd), as defendants.
The three marketers argued that vesting the plaintiff with the power of monopoly in Nigeria’s petroleum industry, as it is seeking in the suit, would kill competitive pricing of petroleum products in Nigeria.
They added that it would further deteriorate Nigeria’s critically ailing economy “and unleash untold hardship on Nigerians, all of which constitute a recipe for disaster in the polity.”
They contended that the plaintiff does not produce adequate petroleum products for the daily consumption of Nigerians, adding that there was nothing before the court to prove the contrary.
They also told the court that they are well qualified and entitled to be issued a licence by the 1st defendant to import petroleum products into the country within the provisions of Section 317(9) of the PIA.
The defendants said: “That if Nigeria puts all her energy eggs in one basket by stopping importation of petroleum products and allowing the Plaintiff to be the sole producer and supplier of petroleum products in Nigeria, with liberty to determine the prices at which it supplies the products, the prices of petroleum products in Nigeria will continue to rise and energy security will elude Nigeria.
“That in the event of any breakdown in or obstruction to the production chain of the plaintiff which stops it from producing, Nigeria will be thrown into energy crises as Nigeria does not have the reserves that would last it for the at least 30 days that it would need to order, pay for, freight and import refined products into tanks in Nigeria.
“That amidst the glaring absence of any credible and demonstrable proof that the Plaintiff refines and supplies adequate petroleum products for the daily use/consumption of Nigerians, giving the plaintiff judicial imprimatur to be the sole supplier of refined petroleum products to Nigerians, thereby encouraging monopoly in a major aspect of Nigeria’s oil industry, is a recipe for disaster in Nigeria’s energy sector.”
According to them, granting the reliefs sought by the plaintiff, which is aimed at making it a monopolist in Nigeria’s petroleum sector, would leave Nigeria and Nigerians at the mercy of the plaintiff with respect to availability and cost of purchasing petroleum products in the country.
They also prayed the court that they are fully qualified for the import licences issued to them by the 1st Defendant, as they duly met all the legal requirements.
They said: “The import licences lawfully and validly issued to the defendants did not in any way whatsoever, cripple the Plaintiff’s business or its refinery. “The import licences issued to the defendants by the 1st defendant are in line with the provisions of Petroleum Industry Act, 2021, the Federal Competition and Consumer Protection Act, 2018 and other relevant laws.”
Dangote Refinery had in the suit, questioned propriety of licences that were issued to other major oil marketers to import refined petroleum products into Nigeria when, according to it, it has not recorded any shortfall in its own operations.
The plaintiff had argued that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) acted in breach of Sections 317(8) and (9) of the Petroleum Industry Act, PIA, by issuing licenses for the importation of petroleum products to the defendants.
According to the plaintiff the licences were issued to the defendants, “despite the production of AGO and Jet-A1 that exceeds the current daily consumption of petroleum products in Nigeria by the Dangote Refinery.”
It, therefore, prayed the court to award N100 billion in damages against the NMDPRA for allegedly continuing to issue import licenses to NNPC Ltd and the other defendants for the import of petroleum products such as Automotive Gas Oil (AGO) and Jet Fuel (aviation turbine fuel) into Nigeria.
Among other reliefs, it specifically, applied for an order of injunction, restraining the NMDPRA from further issuing and/or renewing import licenses to the 2nd to 7th defendants or other companies for the purpose of importing petroleum products.
It prayed for an order of court directing the 1st defendant to seal off all tank farms, storage facilities, warehouses, and stations used by the defendants for the storage of all refined petroleum products imported into Nigeria.
It also prayed for: “An order of mandatory injunction directing the 1st defendant to immediately withdraw all import licenses issued to the 2nd-7th defendants and other companies other than the plaintiff and other local refineries for the purpose of importing refined petroleum products into Nigeria.”
“An order of injunction restraining the 1st defendant from imposing and demanding a 0.5% levy meant for off-takers of petroleum products directly and an additional 0.5% wholesale levy in favor of the Midstream and Downstream Gas Infrastructure Fund (MDGIF) or any other levy or sum against the plaintiff.”
Justice Inyang Ekwo had earlier adjourned the matter till January 20, 2025, to enable the parties to explore an out-ofcourt settlement of the dispute, even as the plaintiff had expressed its willingness to withdraw the suit.
Warning
Managing Director of Network Oil and Gas, Dr Benjamin Ubido said Dangote cannot stop the importing of refined petroleum products. He said: “So now, the issue is should they continue to import when we can produce it here.
As he is producing it here, should we allow him to monopolise it if they withdraw the licenses of all those who are importing, will it change what is happening.
If you are looking at it, you may ask what is the advantage and disadvantage. For me, I will say it is an open market. Let the law of demand and supply determine the price.”
He said the solution to the lingering fuel scarcity is Nigeria to drill its gas deposits. Ubido said: “The solution to the fuel scarcity is very easy. Nigeria is a gas nation though with a drop of crude oil. We should begin to exploit gas, drill gas. Russia drills more gas than crude oil.
Once we begin to drink gas, we can produce liquefied natural gas (LNG), liquefied petroleum gas (LPG) and compressed natural gas (CNG). “The cost of gas, for instance CNG, is cheaper.
If you are using a CNG generator that consumes N500, 000 a month, if you are using diesel, that diesel will consume N5 million a month. So the cost of CNG is about 10% of that of diesel. If you have, you can use gas to power your house.
From gas, you can produce PMS, diesel, LPG, propane, etc. So the solution is gas.” A former National Assembly member, Barrister Sergius Ogun said it is surprising that in spite of the fall in price of crude oil in the international market, the prices of refined Petroleum products in Nigeria have not reduced.
According to him, “If downstream has been deregulated, if the price of crude oil falls, which means white petrol which is diesel and petrol will also drop.
So if the price of crude oil has dropped by 4% in the international market, why is our refined product not dropping?” An oil and gas commentator, Julius Idehem noted that Dangote refinery is a national pride as it has removed Nigeria from the international opprobrium of a leading crude oil exporter among the Organisation of Petroleum Exporting Countries that has not refinery and entirely depended on imports for its domestic refined petroleum products need.
While calling for the encouragement of the refinery, he also said it would be a national energy risk for the country to entirely rely on Dangote refinery for its refined petroleum products needs.
He noted that as Nigeria has fully deregulated its downstream sector, options for importation of petroleum products should be open to avoid monopoly with its attendant negative consequences.
He also called on NNPCL and the Federal Government to ensure that Port Harcourt, Warri and Kaduna refineries are functional. Idehem appealed to the Federal Government to encourage BUA refineries to start production.
He added that modular refineries such as Walter-Smith, Aradel, and Edo Refinery among others be supplied with crude and given all necessary support to refine products optimally so as to engender healthy competition and save Nigeria from the evils of monopoly.
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