Dangote Refinery Receives First Crude Supply, Set to Revolutionize Nigeria’s Oil Industry
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has initiated efforts to ensure local crude oil refineries in the country receive uninterrupted feedstock, in alignment with the Petroleum Industry Act (PIA). The move comes in anticipation of the start of operations at the 650,000-barrel-per-day Dangote refinery, which is set to be Africa’s largest. The NUPRC is determined to prevent any shortages of feedstock for domestic refineries.
The NUPRC’s efforts to ensure local refineries receive adequate crude supply align with the PIA’s domestic supply obligation. This initiative is essential for the stability of the domestic refining industry, especially with the imminent start of the Dangote refinery. While challenges like currency of transaction and crude variety exist, the NUPRC aims to address them and prevent shortages of feedstock for domestic refineries, contributing to Nigeria becoming a net exporter of refined products.
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Nigeria’s overall exports would reach N26.79 trillion in 2022 thanks to a 46.41 percent increase in crude oil sales.
The entire amount of commerce increased by 31.79 percent, from N39.75 trillion in 2021 to N52.39 trillion in 2022. Sales of crude oil reached N21.09 trillion in 2022, a 46.41 percent rise from N14.41 trillion in 2021. Crude oil constituted 78.74% of all exports in 2022.
The National Bureau of Statistics reports that overall exports for 2022 increased by 41.72 percent, from N18.91 trillion in 2021 to N26.79 trillion in 2022. In 2022, imports increased by 22.77% from N20.84 trillion in 2021 to N25.59 trillion.
In 2022, Nigeria spent N2.63tn importing food and live animal; N10.12tn importing petroleum and other mineral fuel; N1.93tn on manufactured goods; and N5.93tn on machinery and transport equipment.
Commenting on the growth of foreign trade, the NBS said, “In the fourth quarter of 2022, Nigeria’s total trade stood at N11.72tn of which total exports stood at N6.36tn and total imports amounted to N5.36tn.
“On an annual basis, total trade was N52.39tn, total imports amounted to N25.59tn, and total exports were recorded at N26.79tn.”
Explaining the breakdown for Q4, 2022, the national statistics body stated, “The top five export destinations in the fourth quarter of 2022 were Spain, Netherlands, India, France, and Indonesia accounting for 9.70 per cent, 9.03 per cent, 7.71 per cent, 7.70 per cent and 7.44 per cent respectively of total exports.
“Altogether, exports to the top five countries amounted to 41.59 per cent of the total value of exports.”
It added, “In terms of Imports, in the fourth quarter of 2022, China, Belgium, India, The Netherlands, and the United States of America were the top five countries of origin of imports to Nigeria.
“The values of imports from the top five countries amounted to N2.99tn representing a share of 55.82 per cent of the total value of imports. The commodities with the largest values of imported products were ‘Motor Spirit Ordinary’ (N1.56tn), ‘Gas Oil’ (N220.47bn), and ‘Durum Wheat (Not in seeds)’ (N187.96bn)”
Despite witnessing a boost in crude oil sales, the World Bank had stated that Nigeria did not benefit from oil price boom because of fuel subsidies and reduce oil production.
According to the global bank, the average price of crude oil increased by over 150 per cent from 2020 to 2022, but Nigeria’s macroeconomic performance weakened over this time, with its fiscal space shrinking. It stated that in 2022, the government fiscal deficit was estimated to have increased to 5.7 percent of GDP from 5.4 percent in 2020 before the boom.
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The Washington-based bank said that high production costs, theft and insecurity, joint-venture cash-call arrears, and inadequate investment have caused Nigeria’s crude oil output to fall consistently below its Organisation of the Petroleum Exporting Countries quota since June 2020.
Commenting on fuel subsidy, the bank explained, “Second, the ballooning cost of the petrol subsidy: The continuation of the petrol subsidy (deducted directly from oil revenues) implies forgone fiscal revenues of 2.5–2.7 per cent of GDP in 2022.
“This, combined with the protracted decline in oil production, has resulted in the lowest levels of net oil revenues (in percent of GDP) being transferred to the government in over a decade.”
In its recent article IV report on Nigeria, the International Monetary Fund stated, “Higher oil prices are yet to deliver tangible benefits amid contraction of oil production and costly fuel subsidies.”
According to the IMF, Nigeria has missed its opportunity to benefit from higher global oil prices. From January to July 2022, Nigeria’s oil production slumped by 28 million barrels threatening the Federal Government’s N9.37tn oil and gas revenue target for 2022.
From January and April, the government projected that it would earn N3.12tn, but only generated only N1.23tn in the period.
A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, had stated that the continued reduction in oil production and the country’s inability to meet its revenue target might lead to bankruptcy.
He said, “The massive oil theft in the Niger Delta, which is on an industrial scale, has continued to stop Nigeria from meeting its OPEC production quota. The impact of this is very clear. The finance minister told you that the government was finding it difficult to meet its obligations because of a lack of funds.”
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According to the Nigeria Extractive Industries Transparency Initiative, Nigeria lost 619.7 million barrels of crude oil worth $46.16 billion or N16.25 trillion in 12 years, from 2009 to 2020.
It revealed this in a statement released on Thursday night by Obiageli Onuorah, its head of communications and advocacy.
In addition, it applauded the Federal Government’s decision to form a Special Investigative Panel on Oil Theft and Losses in Nigeria, praising it for being timely, brave, and courageous considering the damage the problem has caused to oil production and the nation’s ability to generate income.
Nigeria’s crude oil losses, according to NEITI, were basically from theft and sabotage, according to information and data provided by an average of eight companies covered by NEITI’s process over the years.
A breakdown of the losses showed that in 2009 when NEITI commenced reporting of crude oil theft, Nigeria lost 69.49 million barrels valued at $4.31bn.
The figures for 2010, 2011 and 2012 revealed that 28.31 million, 38.61 million and 51.58 million barrels which were valued at $2.29bn, $4.39bn and $5.82bn were lost respectively.
The NEITI oil and gas industry reports for 2013 to 2020 also showed that the losses to crude oil theft did not abate as 78.30 million barrels valued at $8.55bn was lost in 2013 alone.
2014 and 2015 witnessed combined losses of 67.29 million barrels valued at $5.57bn.
According to the NEITI reports, 2016 recorded the highest losses of 101.05 million barrels that was valued at $4.42bn.
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Between 2017 and 2020, the NEITI reports indicated losses of 36.46 million barrel ($1.99bn) in 2017; 53.281 million barrels ($3.837bn) in 2018; 42.248 million barrels ($2.772bn) in 2019; and 53.056 million barrels ($2.21n) in 2020.
The combined value of these losses was 619.7 million barrels amounting to $46.16bn over a 12-year period.
NEITI lamented that it was regrettable that at a time Nigeria’s economy was largely dependent on oil revenues, some Nigerians would choose to collude with foreign nationals to steal and sabotage the main sources of revenue for the federation.
The agency particularly expressed delight over the new collaboration between the Offices of the Secretary to the Government of the Federation and that of the National Security Adviser in coordinating the investigations and its wisdom to appoint NEITI in this Special Panel.
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Former President Chief Olusegun Obasanjo has stated that the oil and gas sector can no longer feed the country’s expanding population.
Obasanjo made the declaration during a weekend visit to his Olusegun Obasanjo Presidential Library (OOPL) Penthouse residence in Abeokuta, Ogun State capital, by the leadership of the apex Socio-Cultural organization in Tiv territory of Benue State, Mzough U Tiv (MUT).
Obasanjo, replying to President-General, Chief CP Iorbee Ihagh’s (rtd.) speech, urged Nigerians to consider the country as for everyone, “to save it and restore to what God has made it to be,” according to a statement by his Special Assistant on Media, Kehinde Akinyemi.
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According to him, “Only farming and agric business could tackle the nation’s growing population. Farming and agric business is what will feed the nation.”
He urged the Tiv people to focus on farming and agriculture, emphasizing that he had put his experience of having his farm burned down in Benue State behind him, as he hinted at establishing an industry in the state the following year.
Obasanjo stated his support for a change in leadership from the North to the South, while the Middle Belt region should continue to advocate for the country’s rotational presidency.
He submitted that, “if Nigeria is ready to get it right, the 2023 election should be a turning point. We should not go for emotion that will destroy us,” Obasanjo, who was conferred with the title of a “Great Warrior” of Tiv land by the socio-political group said.
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Ihagh earlier in his speech, stated that the reason for the group’s friendship visit “is basically to interface with you as our former Head of State, a political Pillar, a nationalist and elder statesman to appreciate your overwhelming love, passion and concern you have demonstrated over the Tiv people,” stressing that it was also historic.
He proposed three petitions to the former President, including the construction of a fruit juice business in Benue state and inclusive national politics.
There was also the matter of the Fulani herders’ attack on TIV land and the Nigerian power sharing formula.
According to him: “With regards to the current power equation in the country, we in the Mzough U Tiv in conjunction with the Middle Belt Forum had unanimously resolved for power shift from the North to the South for fairness, justice and a true federalism.
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“We want to call on your Excellency and other well meaning Nigerians to strictly adhere to the principle of rotation and distributive justice. If this is enforced, the middle Belt would also be assured of producing the next president come year 2031,” Ihagh said.
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In the first quarter of2022, Nigeria’s crude oil exports increased by nearly 200 percent when compared to the same period in2021, despite increasing calls for economic diversification.
The figures, contained in the Foreign Trade Report of the National Bureau of Statistics, said Nigeria’s total merchandise trade stood at N13 trillion in the first quarter of 2022, indicating an increase of 11.05 per cent over the value recorded in the fourth quarter of 2021 and 65.41 per cent higher when compared to the value recorded in the first quarter of 2021.
The export trade in the quarter under review stood at N7.1 trillion, showing a rise of 23.1 per cent over the value recorded in the preceding quarter and also an increase of 137.9 per cent over the corresponding period of the preceding year.
On the other hand, total imports were valued at N5.90 trillion, indicating a decrease of 0.7 per cent over the value recorded in the preceding quarter.
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According to the report, the value of exports trade in the first quarter of 2022 was dominated by crude oil exports valued at N5.6 trillion which accounted for 79.16 per cent of total exports while non-crude oil exports value stood at N1.4 trillion or 20.84 per cent of total exports, of which non-oil products contributed N715.19billion representing 10.07 per cent of total exports.
The latest figures by the NBS show a 194 per cent increase in Nigeria’s crude oil exports when compared to the first quarter of 2021 (N1.9trn).
The figures also indicate the continued decline in the performance of the non-oil sector, which contributed N1.47trn (20.84 per cent) to the total exports in the period under review.
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According to the report, the value of manufactured goods stood at N3.1 trillion, representing 24.55 per cent of total trade. However, the export component accounted for only N219.08 billion of the total trade, meaning Nigeria imported nearly 15 times the value of manufactured goods it exported in the first quarter of the year.
Speaking on the causes of the sharp increase in the amount of exported crude within one year, an energy expert, Bala Zaka, said the numbers did not necessarily mean an increase in the volume of exports.
According to him, factors such as the Russia-Ukraine war had led to a significant rise in the price of oil in the international market; and, as a result, oil revenue had increased far above the projected benchmark when the year began.
“It’s not that the quantity of crude oil increased. It is the shortage in energy as a result of the Ukraine-Russia crisis. Even before that time, some countries were having issues. Because of these shortages, and based on the principle of demand and supply, the demand was generally high globally. That led to the increase in the price of crude oil per barrel. Right now, the price of crude oil is more than $120. Around this time last year, it was not even up to $80.
“When we started, the benchmark price for crude oil was about $57 per barrel. That was what they predicted when they were preparing the 2022 budget. But before we knew it, they increased it to about $62. The volume didn’t necessarily increase. It was the price per barrel that increased.”
Zaka further noted that the latest numbers should not be misinterpreted to imply a resurgence of the Nigerian economy, noting that the country was still unable to produce enough quantity to meet the benchmark set by the Organisation of Petroleum Exporting Countries due to poor management of the oil sector by the government.
“Why the volume did not increase is because we are still experiencing business climate hostilities. International oil and gas companies are divesting from shallow waters and swamp oil and gas assets to better, peaceful, safer, cheaper oil and gas investment havens.
“People should not misconstrue that to mean that the economy of Nigeria is doing well. In terms of production volume, we are still not able to produce up to the OPEC quota. We are also not able to produce up to the budget volume for our 2022 budget. Because of the crisis in the Balkans and what is happening in Ukraine and Russia, there is this reduction in the global crude oil that is being pumped.”
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Nigeria’s crude oil quota has been enhanced by the Organization of Petroleum Exporting Countries (OPEC) from 1.772 million barrels per day in June 2022 to 1.799 million barrels per day in July 2022.
According to the world’s oil supply governing body, the raise was by 27,000 barrels, translating to 3.4% increase in the month of July.
The cartel disclosed the news in its press statement on its 29th OPEC and non-OPEC Ministerial Meeting was held via videoconference on Thursday.
In the statement, OPEC also approved the highest production volume of 10.833million barrels per day for Saudi Arabia and Russia.
As the United Arab Emirates is to produce 3.127million barrels per day, Iraq and Kuwait are to produce 4.580million barrels per day and 2.768millions barrels per day respectively, the organisation ratified 1.753million barrels per day for Mexico and 1.680million barrels per day for Kazakhstan.
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The increase made Nigeria to be top on the list of its African counterparts and followed by Angola that got approval for 1.502million barrels per day.
According to OPEC, the meeting “advance the planned overall production adjustment for the month of September and redistribute equally the 0.432 mb/d production increase over the months of July and August 2022.
“Therefore, July production will be adjusted upward by 0.648 mb/d as per the attached schedule.”
The meeting, said the cartel, resolved to reaffirm the decision of the 10th OPEC and non-OPEC Ministerial meeting on 12 April 2020 and further approved in subsequent meetings, including the 19th OPEC and non-OPEC Ministerial Meeting on the 18 July 2021.
It also affirmed the production regulation plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC Ministerial Meeting and the decision to adjust upward the monthly overall production by 0.432 mb/d for the month of July 2022.
It extended the compensation period until the end of December 2022 as requested by some underperforming countries and request that underperforming countries submit their plans by 17 June 2022.
On compensation plans, OPEC said it should be submitted in agreement with the statement of the 15th OPEC and non-OPEC ministerial meeting.
It, however, restated the critical significance of observing total conformity and to the compensation mechanism.
The meeting resolved to hold the 30th OPEC and non-OPEC Ministerial Meeting on June 30, 2022.
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Personnel of the 14 Brigade of the Nigerian Army, Ohafia attached to the 144 Battalion Headquarters in Ukwa West local government area of Abia State have destroyed an illegal crude oil refinery situated in Ukwa East Local.
Our correspondent gathered that the illegal refinery was operated by a crude oil syndicate operating between Abia and Rivers State.
Sources within the 14 Brigade told our correspondent that no arrest was made and also confirmed the confiscation and subsequent destruction of two commercial L300 buses, waterproofs containing unrefined crude and the tanks used in the cooking of illegal crude oil stolen from NNPC pipeline within the area.
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The sources disclosed that the operation leading to the destruction of the illegal bunker was conducted in conjunction with the operatives of the Department for State Security (DSS) in Owaza, Ukwa West LGA.
They added; “We got a hint about the activities of an illegal crude oil syndicate operating between Abia and Rivers State.
“From our intelligence, we tracked them to the Nkali community in Rivers State where we discovered their illegal refining camp.
“No arrest was made. The place is swampy. What happened is that they first sighted us and took to their heels and because the place is swampy, it was difficult for us to chase after them.”
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There is was a mixed feeling of fear and excitement in a non-crude oil-producing community in Ogbia Local Government Council of Bayelsa State when crude oil was discovered to have spurted from the ground.
Whether the crude oil was forced out of the ground by human or natural causes is yet-to-be-established but National Oil Spill Detection And Response Agency (NOSDRA) has visited the site and taken samples for testing.
However, an environmental scientist attached to the NOSDRA Reference Laboratory who also visited the site and pleaded not to be mentioned hinted that the crude oil is fresh, indicating that the crude oil may have erupted through a crack on the ground.
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He explained that “when crude oil under the surface of the earth is overdue for exploration, it usually escaped from the ground through any crack that may have caused by vibration. It usually comes out in thick bitumen form, so there is nothing strange about this discovery because it happens from time to time.”
According to a chief of the community, Augustine Okpukpu-Isi, the crude oil was first discovered by a farmer somewhere in Iyapogo forest along the Ogbia Creek, who later alerted the leadership of the community.
Explaining further, Okpukpu-Isi said “many exploration companies have come to look for crude oil in our community without any luck. So we were surprised when one of my brothers came to inform us that he saw crude oil bubbling out of the ground somewhere in our forest.
“At the beginning, it was bubbling out with force but now it has stopped. So we have appealled to the government to come and take a look at it and find out if it can be drilled. In a case where it can be drilled for commercial purposes, please don’t bring a company that would come and divide us.”
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Also speaking, the Senior Special Assistant to the Governor on Oil and Gas, Chief Timi Seimiebo, who led NOSDRA officials to the site assured that government would investigate the source of the crude oil and prevent it from polluting the environment.
He said “I am here with NOSDRA to take a sample for testing, in order to get the signature of the crude. We are also trying to get the coordinate of the site to trace the OML the site falls under.
“However, our investigation revealed that there is no pipeline running through or bunkering activities taking place in and around the community. So for now, we would have to wait for the results to be out before deciding our next line of action.”
Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has said that Nigeria must discontinue its dependence on crude oil to guarantee public revenue and foreign exchange.
Emefiele sad this on Saturday in Abuja during a ceremony to mark the end of the 2020 CBN Governor’s Golf Cup tournament.
The governor said that the country needs to utilize other economic potentials in order to move out of economic recession.
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He also stated that sports cannot be left behind while utilizing available tools to ensure the development of the country since it attracts foreign exchange.
“The Bank’s consistency in promoting the game of golf and other sports in the country has had a remarkable impact on youths.
“We have been promoting youth empowerment not only through sporting events but also through the development of finance initiatives and schemes.
“These include Youth Entrepreneurship Development Scheme, Micro Small and Medium Enterprises Development, Agri-Business and Small and Medium Enterprises Investment Scheme and other innovative programs.
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“However, I urge Nigerians to take hold of these opportunities to contribute to the country’s growth and development,” he said.