The Petroleum Products Retail Outlets Owners Association has concluded arrangements with the Dangote Petroleum Refinery to directly lift petroleum products for distribution to depots and retail outlets of PETROAN members nationwide.
PETROAN announced this on Saturday as the Port Harcourt Refining Company reportedly commenced exporting low sulphur straight-run fuel oil, with its first shipment to Dubai, United Arab Emirates.
Industry operators, however, expressed diverse views about the reported export following concerns about the refinery output since it began operations.
The PHRC officially commenced operations on Tuesday, November 26, 2024, after a series of postponements of its resumption dates by its managers — Nigerian National Petroleum Company Limited.
On Friday, PETROAN announced in a statement issued by its National Public Relations Officer, Dr Joseph Obele, that the fuel retailers had struck a deal to offtake products from the Dangote refinery after several negotiations with the $20bn Lekki-based plant.
It said the agreement, coming almost a month after the Independent Petroleum Marketers Association of Nigeria secured the first offtaking approval, guarantees the availability of petroleum products during the upcoming yuletide season.
Obele explained that the agreement was reached during a meeting with officials from the Dangote refinery on Monday, December 2, 2024.
He stated that the association reached a consensus on reserving monthly volume for PETROAN, payment modalities, and a favourable price rate.
The statement read, “The National President of PETROAN, Dr Billy Gillis-Harry, on Monday, December 2, 2024, led the negotiation team of PETROAN to a fruitful strategic business meeting with the management of Dangote refinery at the complex in Lagos.
“PETROAN is impressed with the outcome of the strategic business meeting, which was evidenced by the establishment of a seller-buyer relationship, reservation of monthly volume for PETROAN, payment modalities, and a favourable rate.
“The sealing of a transactional deal with Dangote refinery was the aftermath of a successful buyer-seller negotiation and agreement secured by PETROAN at the strategic meeting.”
PETROAN further stated its right not to reveal intricate details of the deal but expressed optimism that the general public would be the biggest beneficiary.
It added, “We reserve the right not to make public the business terms and conditions, even as we express optimism that the greatest beneficiaries in all shall be the general public as it concerns product availability and affordability.”
Continuing, the statement read, “The national headquarters of PETROAN, Abuja, has expressed confidence that the measures put in place by the association following the commencement of production at the Port Harcourt refinery and fruitful deliberations with the management of Dangote refinery will avert fuel supply shortages during and after the festive season.
The Dangote refinery, the largest in Africa and Europe, has already commenced the production of petrol, diesel, and aviation fuel, with plans to supply products to over 30,000 IPMAN members and 150,000 retail outlets nationwide.
This move is expected to eliminate middlemen, reduce costs, and ensure a steady supply.
P’Harcourt refinery exports
Saturday PUNCH also gathered on Friday that the newly rehabilitated Port Harcourt refinery had commenced the exportation of refined petroleum products, selling its first cargo of low sulphur straight-run fuel oil to Dubai-based Gulf Transport and Trading Limited.
A report by Kpler, a data and analysis company, stated that the refinery started up its Coolant Distribution Unit 1 this week, with its estimates pinning operations at 20,000 barrels per day.
It stated that the 60,000bpd facility, currently operating at 70 per cent capacity, sold its first low sulphur straight run fuel oil cargo, pointing to a gradual and phased start-up of operations.
The ship will load 15,000 metric tons of the product, which translates to about 13.6m litres.
The report said, “Port Harcourt sold its first LSSR cargo, with a sulphur content of 0.26 per cent wt and a 0.918 g/ml density at 15°C, to Dubai-based Gulf Transport & Trading Limited. Loading onboard the Wonder Star MR1 in the coming days. The 15,000 metric tonnes cargo, sold at a $8.50/t discount to the NWE 0.5 per cent benchmark on an FOB basis.”
While this will have a limited impact on global VLSFO benchmarks for now, the latest development changes market realities for Atlantic Basin exporters of clean products into Nigeria and the wider region.
Kpler reported that the development would help displace imports from traditional suppliers in Africa and Europe, as Nigeria’s falling clean product imports are already decreasing, dragging imports into the wider West Africa region lower as well.
It added that the LSSR was produced from the 60,000 bpd section of the refurbished Port Harcourt refinery following a November 26 announcement that it had began processing crude oil.
“LSSR production from this train is expected to steady at about 60,000 metric tonnes per month over the near term. The larger 150,000 bpd section of the refinery, however, remains offline and will start up after production from the first phase stabilises,” it noted.
Continuing, the report said a potential ramp-up to full capacity of 210,000 bpd would weigh on fuel imports to the country after Dangote’s rising refinery runs already pressured gasoline imports to multi-year lows since October.
NNPC stated on November 26 that CDU 1 at Port Harcourt had started operations, also claiming that product exports via trucks had commenced.
Kpler’s in-house crude stocks data corroborates that test runs have been ongoing, with PPMC inventories dropping from 1.5m barrels in August to 1.3Mbbls in October to around 1Mbbls in November (current crude inventories would enable refinery runs of around 30 for one month).
“While CDU 1 has a nameplate capacity of 60,000 bpd, we estimate the unit to only run around 20,000 bpd for the rest of the year, potentially reaching full capacity in Q3 2025, contributing to total Nigerian crude runs of 420,000 bpd in September 2025.
“Port Harcourt’s second CDU could start test runs in late 2025, pushing the refinery’s crude intake to 150,000 bpd in December 2026 and total Nigerian throughput to above 700 kbd.
“As a simple refinery (NCI 4.8) with one 60,000 bpd CDU, 6 kbd Reformer and without an operational FCC (of which we expect the ramp up in late Q3 2025), we estimate that Port Harcourt’s product output will be mainly gasoline, straight run gasoil and fuel oil.
“This implies that by Q4 2025, the plant could supply some 24,000 bpd fuel oil, 15,000 bpd gasoline, 15,000 bpd diesel, 6,000 bpd jet, and some minor volumes of LPG. If CDU 2 were to fully start up, moving capacity to 210,000 bpd and including all secondary units (which we don’t expect before Q2 2026), product output could theoretically move to 82,000 bpd gasoline, 78,000 bpd diesel, 20,000 bpd jet and 18,000 bpd residue (fuel oil, bitumen, slurry).
“We project Port Harcourt to run almost entirely on Nigerian crude grades as it is owned by NNPC and we expect most of the fuel volumes to be consumed by the domestic market and only fuel oil output contributing to product exports,” It noted.
Efforts to get comments from the national oil firm on the development proved abortive as the NNPCL spokesperson, Femi Soneye, didn’t respond to enquiries.
Operators react
Industry players in the downstream oil sector wondered how the Port Harcourt refinery could start exporting products when there had been concerns about its production capacity.
“This cargo is a ploy to make people believe that what they have set up in Eleme is a refinery. But what they will do is transship that cargo to Central Europe and send it back to Nigeria,” a major dealer in the industry who spoke in confidence due to lack of authorisation to speak on the matter, stated.
Another operator in the midstream arm of the sector said, “It is surprising to hear that the plant has started exporting refined products. It is producing at 70 per cent capacity and the part of that refinery that is working is the 60,000 bpd facility.
“So, what quantity of products is it actually exporting, and does it have that capacity to export anything now? The refinery only started operations barely two weeks ago.
Meanwhile, local operations are picking up at the Port Harcourt refinery as more trucks have begun lifting petrol.
A drive from Port Harcourt to the refinery located in Alesa in Eleme Local Government Area of Rivers State takes nearly one hour, no thanks to the deplorable Akpajo-Onne section of the East-West road.
However, when there is gridlock, as is the case sometimes, one may spend between two to three hours trying to meander out of the traffic.
The old Port Harcourt refinery, built in 1963, has been in a comatose state for over seven years but came alive last week when the Group Chief Executive Officer of NNPCL, Mele Kyari, unveiled a new plant at the refinery.
This signalled the commencement of operations there although many Nigerians received the news with a pinch of salt.
Though actual loading of products took place under the supervision of the NNPCL Group CEO, the news which filtered out the same day that over 200 trucks lifted petrol was found to be false as the number of trucks that lifted petrol was less than 10.
After Kyari’s departure, it was gathered that operations were scaled down due to some further upgrade of facilities that took place such as calibration, coupled with de-watering of the old stock which had to be emptied to pave the way for newly refined products.
Though the refinery loading arms are numbered one to 18, the Terminal Manager of Port Harcourt Depot, Chike Joel, while conducting newsmen on a tour of the refinery led by the Managing Director, Ibrahim Onoja, last week, said the depot operates with 15 functional arms inside the loading bay but with only three currently in use due to their capability of loading three trucks in 15 minutes.
“If you give us 100 trucks today we can evacuate them in less than five hours,” Joel added.
However, findings by one of our correspondents revealed that throughout last week, less than 20 trucks lifted products from the newly commissioned facility as de-watering and calibration took place.
However, in the latter part of this week, there was a marked improvement in activities at the refinery as about 11 trucks lifted products on Wednesday.
Our correspondent, who visited the depot on Thursday, reports that some trucks that lifted products late on Wednesday were waiting for their waybill, while more trucks started coming in after being cleared.
Effectively on Thursday, 19 trucks of 45,000 litres capacity each lifted petrol with the first loading at exactly 1.04 pm taking about 45 minutes to load one truck from the loading bay. A fire service truck drove in at exactly 1.23 pm and was stationed near the loading bay.
While six trucks strolled in on the first batch, a total of 19 trucks lifted petrol as of 6pm when loading stopped.
Meanwhile, only mega marketers (the NNPC and OandO) are loading PMS at the refinery as independent marketers have yet to patronise the facility due to pricing issues.
Truck drivers and other stakeholders confirmed to our correspondent that only petrol is currently being dispensed.
Credit: Punch