Nigeria reaches agreement with Dangote on gasoline distribution

Nigeria has reached an agreement with the Dangote Refinery through which the country’s state-owned energy firm will be the sole distributor of gasoline from the plant.

Nigerian National Petroleum Co. will supply crude to the Dangote Refinery and in return be the sole distributor of gasoline from the refinery, Zacch Adedeji, chairman of the technical sub-committee that negotiated the deal, said in an emailed statement. The transaction will be performed in local currency.

“I am glad to announce that all agreements have been completed and loading of the first batch of PMS from the Dangote Refinery will commence on Sunday, Sept. 15,” Adedeji said, referring to premium motor spirit, or gasoline.

The deal has the potential to upend global trade in crude and refined products. It simultaneously cuts Nigeria’s dependence on imports of refined products and the Dangote Refinery’s need for imported crude.

The 650,000-barrels-per-day Dangote Refinery started the processing of gasoline this month and had indicated that it was waiting for a deal with the NNPC before it starts distributing the product.

“This initiative will help reduce pressure on the naira, eliminate unnecessary transaction costs, and improve availability of petroleum products in the country,” Adedeji said. “Diesel will be sold in naira by the Dangote Refinery to any interested off-taker. PMS will only be sold to NNPC; NNPC will then sell to various marketers for now,” he said.

As part of the agreement, the state-owned company will from Oct. 1 start supplying about 385,000 bpd of crude oil to the refinery, to be paid for in naira, for local processing, according to the statement.

This will cut the refinery’s demand for imported crude from the US and other parts of the world, which has sustained its production since it started processing crude at the beginning of the year.

The Dangote Refinery will be able to turn more than half of its full capacity into gasoline, enough to satisfy Nigeria’s demand for the product. It is expected to to reach this level of production in three to four months, Vartika Shukla, chairman of Engineers India Ltd., the project managers, said this week.