Dangote Refinery, Others to Buy Crude in Naira

Crude Oil Price
The Petroleum Industry Bill passed by the National Assembly on Thursday indicated that companies holding refining licenses in the country can pay for domestic crude oil supply in naira.

The Companies holding refining licences include Dangote Oil Refinery Company, Waltersmith Refining & Petrochemical Company Limited, OPAC Refineries, Niger Delta Petroleum Resources, BUA Refinery & Petrochemicals and Edo Refinery and Petrochemical Company Limited.

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According to copies of the passed bills, the Senate and House of Representatives recommended that payment guarantees to be provided by refinery license holder shall be in dollar or naira.

The Senate Joint Committee on Downstream Petroleum Sector; Petroleum Resources (Upstream); and Gas said in its report that, “Since refiners themselves may only be paid in naira for deliveries to the domestic market, it may be onerous to require US dollar payments.”

Apart from the fact that the bill provides that two regulators be established, namely the Nigerian Upstream Regulatory Commission and the Nigerian Midstream Petroleum Regulatory Authority, in Section 109 subsections 2 and 3, the National Assembly said, “The commission may issue regulations or guidelines on the mechanism for the imposition of a domestic crude oil supply obligation on lessees of upstream petroleum operations, including applicable penalties.

“The authority shall supply the commission on a regular basis the crude oil requirements of refineries in operation and where shortages or inadequate supply conditions occur report such conditions to the commission.”

The bill sent to the National Assembly provides that “the commission shall ensure that the domestic crude oil supply obligation contains the following: (a) crude oil may only be sold to holders of crude oil refining licences, whose refineries are in operation.

“b) the supply of crude oil shall be commercially negotiated between the lessee and the crude oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil; and (c) holders of crude oil refining licences shall provide payment guarantees as required by the applicable lessee and payment for crude oil purchased pursuant to obligations shall be in US dollars.”

The lawmakers recommended that “holders of crude oil refining licences shall provide payment guarantees as required by the applicable lessee and payment for crude oil purchased pursuant to obligations shall be in US dollars or naira, as may be agreed between the lessees or suppliers and the licensee of the refining licence.”