Crude oil

Many Nigerians invested hopes in the Dangote Refinery and thought it would bring stability to Nigeria’s chaotic petroleum industry. But on the cusp of its coming on stream, it began to be dogged by regulatory and other kinds of puzzling troubles from the Bola Ahmed Tinubu administration.

Why is a refinery that is supposed to be a shining light of domestic investment stymied by needless state-sanctioned controversies?

We sought answers to our question on August 31 during an impassioned and insightful two-hour discussion in the third edition of the Diaspora Dialogues, a monthly discussion show organized by Dr. Osmund Agbo, Professor Moses Ochonu, and I, which attracted scores of attendees.

My colleagues and I are by no means experts in the oil industry. That was why Professor Ochonu, who anchored the discussion, first did extensive documentary research to establish the background to the issue and later invited contributions from the audience. Although more than 10,000 people watched the discussion from my Facebook livestream, our Zoom could only contain 100 people at a time.

In response to multiple requests from people who missed the show, I offer a summary of the conversation in this week’s column in light of the continuing centrality of the issues we discussed, especially as Nigeria grapples with yet any steep petrol price hike amid availability struggles in spite of the coming on stream of the Dangote Refinery.

The Dangote Refinery began test production this week and was, according to Aliko Dangote, ready to roll out its petrol right way, but it still faced the challenge of securing enough crude locally to feed its 650,000-barrels-per-day-capacity refinery.

Prof. Ochonu, in his background to the issues, pointed out that one or more possibilities could explain why the Dangote Refinery was stuck in prolonged gestation: the NNPC and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) wanted to withhold crude from Dangote to sabotage the refinery, or they wanted to punish him on behalf of the present administration for allegedly supporting Tinubu’s rival during the 2023 presidential election, or they didn’t have the crude to supply to Dangote and wanted to use the ludicrous and false excuses and propaganda of “substandard products,” “no license,” and non-completion to cover the fact that they were not able to supply crude to Dangote.

It also seemed, Prof. Ochonu added, that the NNPC and International Oil Companies (IOCs), NNPC’s joint venture partners, are not able to guarantee supply of crude to Dangote for even more tragic reasons.

He pointed to the fact that two successive APC governments have mortgaged much of Nigeria’s 1.5 million bpd production to secure so-called crude-backed loans running into billions of dollars, which have to be repaid with future crude production. It started with Buhari and continues with Tinubu.

Ochonu’s research revealed that the NNPC and the NUPRC wanted to continue exporting crude because such transactions are done in dollars and are shady dealings involving middlemen, bribes, cuts, and layers of profiteering.

Even though the Petroleum Industry Act (PIA) mandates the NUPRC to ensure the supply of crude to local refinery as a priority over export, the NUPRC claimed that they could not compel the IOCs to supply Dangote because the IOC’s had signed prior crude supply contracts with buyers overseas, some of whom financed their crude extraction operations in Nigeria. The IOCs, the NUPRC claimed, would be in violation of those contracts if they supplied Dangote with crude.

Mr. Dan Kunle, a respected oil industry expert and former Senior Technical Adviser to a past Minister of Petroleum Resources, in his contribution, said perhaps the reluctance of the NNPC and NUPRC to supply Dangote crude stemmed from their hope that it would derail the refinery because if Dangote started production, they’d no longer have a reason to export the 450, 000 bpd set aside for local refineries, which has been exported since the local state refineries stopped functioning over a decade ago.

Tinubu’s directive to the NNPC to sell crude to Dangote in naira is a welcome development if implemented, but the key questions are: 1) Where is the crude (650,000 needed by Dangote) going to come from when export contracts and crude-backed loan obligations have already been signed by government and its oil industry entities? 2) Will the NNPC comply with the directive, which reduces its lucrative crude export business?

The show raised several pertinent questions that arise from the accusations and counter-accusations between Dangote and government entities trying to sabotage his refinery:

One, how much of Nigeria’s daily crude production has been committed to creditors who loaned the Buhari and Tinubu administrations billions?

Two, how has the 450,000 crude set aside for domestic refining been handled over the years? According to Mr. Kunle, the NNPC exports these 450,000 barrels because local refineries are currently comatose.

In what they call crude swap deals, the crude is then refined abroad and resold to Nigeria as petrol. But as Kunle asked during the show, apart from the petrol derived from it, what’s been happening to the other derivatives from the refining process—diesel, kerosene, etc.? The NNPC has never given Nigerians an account of these derivatives. If they’re sold, to whom are they sold and how much has been realized over these decades?

Three, how much fuel do Nigerians consume daily? The NNPC and its subsidiaries bandy around outlandish figures that are disputed by industry experts. Kunle said during the show that one of the potential benefits of Dangote’s refinery is that it will reveal the true, accurate numbers regarding Nigeria’s daily fuel consumption/demand, which will potentially expose one layer of fraud in the fuel importation regime, where many industry experts have long suspected that the importation cabal have been inflating Nigeria’s daily fuel needs to submit false invoices that rely on the bogus consumption claims.

Four, why would Nigeria’s oil law, the PIA, not trump and supersede whatever other contracts and laws NNPC and IOCS have entered into? The PIA clearly authorizes the NNPC to prioritize the crude needs of local refineries such as Dangote and other smaller ones, whose combined daily crude need is put at 597,700 barrels per day (bpd)?

Five, when will the allegedly refurbished Port Harcourt and Warri refineries commence operations (the NNPC has postponed the commencement of operations three times now, with the last postponement done to the end of August), and where will the crude come from and at what price (dollar or naira, subsidized or prevailing international price?)

Professor Ochonu pivoted to the possible motives and identities of people who might have a personal or business investment in killing the Dangote Refinery. He named three.

The first, he said, are the honchos at the NNPC and oil regulating agencies. Their motive, he pointed out, is to maintain the status quo of lucrative and fraudulent fuel importation and crude export businesses.

The second, he pointed out, is the Tinubu government. The motive might be to sabotage a businessman who allegedly funded Tinubu’s opponent during last year’s presidential election.

Another motive, Prof. Ochonu added, might be to protect the rapidly expanding midstream and downstream dominance of Tinubu family-owned OANDO in the Nigerian oil industry. Dangote would be a direct and massive competitor.

The third entities Prof. Ochonu identified were a conspiracy of international oil refineries and a crude-buying and fuel-marketing cabal. He called attention to a report by investigative journalist David Hundeyin that blew the lid on a campaign by a Western oil cabal against Dangote refinery.

The oil company offered to pay Hundeyin and perhaps local journalists to write stories against Dangote using a prepared script of environmentalism and environmental protection, which is a clear ruse to hide their true motive of wanting to maintain the status quo of their purchase of Nigerian crude, refining it poorly below European standards, and re-exporting it to Nigeria at massive profits.

A US-based Nigerian engineer and industry expert by the name of Dr. Muhammad Kabir Hassan, corroborated Hundeyin’s claims during the show.

The final issue tackled in the show had to do with the scandal of NNPC retail (NNPCL) purportedly purchasing a company named OVH (OANDO, Velar, Helios)

The OVH scandal is related to what is happening to Dangote because, after allegedly purchasing OVH (for how much, no one knows and commenters on the show said NNPC owes Nigerians an explanation and the transaction numbers), the NNPC then turned around and inexplicably asked a judge to dissolve its retail arm (NNPCL-Retail) and then, in a move that should be a first in history, turned over all of its retail operations (fuel stations and depots all over the country) to OVH to run.

This means that OVH staff and managers have replaced NNPCL staff at all NNPC fuel stations, which have now been rebranded as OVH. OVH, of course, emerged only a few years ago as a result of a merger involving OANDO, Velar, and Helios (hence the acronym). All three were small players in the retail (downstream) sector of the Nigerian oil industry, but with tentacles in fuel importation.

Dr. Hassan enjoined Nigerian journalists to investigate the true ownership of OVH at the Corporate Affairs Commission, the amount NNPC paid for OVH, the terms of the sale, and what, if any, benefits are accruing to OANDO, Tinubu’s family business, from NNPC’s purchase of OVH and its surrender of its sprawling retail business to the acquired entity.