The Dangote Petroleum Refinery has explained the reason behind the recent N100 increase in the ex-depot price of petrol from its facility, which occurred amid the escalating conflict involving the United States, Israel and Iran.
The refinery attributed the price adjustment to rising global crude oil prices and supply disruptions in the international market caused by the war.
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Since the war broke out, Brent crude oil prices have experienced significant increases and fluctuations following the closure of the Strait of Hormuz.
The Strait is the waterway through which about half of the world’s crude oil and condensates are exported. However, shipment and trucking of products have been halted due to the ongoing war across the Gulf countries.
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PREMIUM TIMES reported on Tuesday that the Dangote refinery increased its petrol gantry price by N100, raising the ex-depot rate from N774 to N874 per litre amid renewed volatility in global crude oil markets.
Following the adjustment, major filling stations in Abuja quickly revised their pump prices. PREMIUM TIMES observed that both Conoil and NNPC filling stations along Airport Road in Lugbe are selling petrol at N960 per litre, up from N880 and N875 on Monday.
In a statement issued on Thursday, the refinery’s management said the decision followed sharp increases in crude and freight costs triggered by ongoing geopolitical tensions in the Middle East, which have disrupted refining activities and tightened global supply of petroleum products.
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The company noted that the conflict has forced the shutdown of some refineries and reduced output across several parts of the world, contributing to a global shortage of refined petroleum products.
“Dangote Petroleum Refinery & Petrochemicals reassures Nigerians of its unwavering commitment to serving as a stabilising force amid recent shocks in the international oil market,” the statement said.
The refinery said the price adjustment raised its ex-depot petrol price by N100 per litre, representing an increase of about 12 per cent.
“The refinery implemented a measured adjustment of N100 per litre in its ex-depot price of Premium Motor Spirit, representing an increase of about 12%,” the company stated.
Despite the increase, the refinery said it absorbed part of the rising costs in order to cushion the impact on the domestic market.
“The refinery has absorbed 20% of the cost escalation, for now, to cushion the domestic market,” it said.
Rising crude costs
The refinery explained that the cost of crude oil sourced for its operations has risen significantly, noting that Nigerian crude currently trades above the global Brent benchmark.
“It is worth noting that Nigerian crude oil is more expensive than the Brent benchmark price by $3 to $6 per barrel,” the statement said.
According to the refinery, after factoring in freight charges of about $3.50 per barrel, the landing cost of crude oil at its facility ranges between $88 and $91 per barrel.
The company added that although it receives some crude supply from the Nigerian National Petroleum Company Limited, the volumes fall short of its operational requirements.
“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,” the refinery stated.
It added that the shortfall has forced it to source additional crude from international traders at higher premiums.
“The high crude cost is compounded by the fact that Nigeria 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.”
Domestic supply priority
The refinery said it remains committed to prioritising supply to the Nigerian market in order to shield the country from global supply disruptions.
“The Dangote Refinery will ensure that Nigeria is insulated from these supply shocks by prioritising supply to the domestic market.”
It also warned that selling refined products below cost would undermine its ability to sustain production.
“Selling below cost would undermine its ability to procure crude, sustain production and guarantee uninterrupted supply to Nigerians.”
Logistics improvements
As part of efforts to improve distribution and reduce logistics costs, the refinery said it is accelerating the deployment of trucks powered by Compressed Natural Gas (CNG).
READ ALSO: Cement price hikes lift Dangote Cement’s annual profit twofold to N1 trillion
“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 company said the rollout of the trucks is scheduled to begin this month.
Reaffirming its long-term commitment to the country’s energy security, the refinery added: “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.”
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