As oil prices surge across the globe due to the US-Iran war, local refiners have urged the Federal Government to drop the use of international pricing benchmarks for crude supplied to domestic plants, saying the current structure inflates costs and undermines local refining.
The spokesperson for the Crude Oil Refiners Association of Nigeria, Eche Idoko, said in an interview that the association had consistently pushed for a domestic pricing arrangement that reflects Nigeria’s peculiarities.
According to Idoko, crude supplied to local refineries should be priced based on locally designed pricing instead of using Brent as a benchmark.
“If you are using Brent to benchmark our pricing, the factors that are affecting the Brent pricing will still affect the price at which you are landing crude here. What we have always insisted on is that those elements in Brent that do not apply to the trade between the local refinery and the oil producers should be discounted. And like that, you get the actual cost of crude for local refineries,” he said.
He added that reducing such cost elements would benefit consumers, saying that at that point, Nigerian consumers can enjoy affordable petrol pricing. Idoko further argued that certain charges imposed at terminals should be suspended to reduce costs for local refiners.
“And then, there were some other terminal charges by the federal government through NUPRC, NMDPRA, and other agencies at the terminal that we feel, if removed, would also reduce fuel pricing. It may look like it’s not much, but because the product is one of fine margins, if you suspend those charges, it will help. We are not saying you should remove it completely,” he said.
He stressed that the association’s position was that crude pricing for domestic refineries should reflect local realities rather than international benchmarks. He said increasing production would help if the government implements the domestic crude supply obligation.
Idoko maintained that the pricing mechanisms should factor in the uniqueness of Nigeria and remove elements in international pricing that do not apply to the country. The CORAN spokesman maintained that domestic crude transactions should not be tied to international pricing indices.
“The Brent crude should no longer be the pricing benchmark for crude supplied to local refineries in Nigeria. When you are selling to refineries within the country, you cannot use the Brent price,” he stated.
He also called for transparency in crude pricing components, asking oil producers to ensure fair pricing. “I think oil producers need to be transparent in the pricing. What are their price constituents? So, if you are giving me crude at $110, what makes it $110? Give me the breakdown,” he said.
Idoko added that domestic refineries should not bear costs that are not applicable to local supply. “If you are selling to a Nigerian refinery, you don’t have to pass through the Strait of Hormuz, or you are not exposed to any of the dangers of the war. So, you are supposed to consider all these,” he said.
He reiterated that adopting a domestic pricing framework would support the survival of modular refineries. “For a modular refinery to break even, the pricing has to be reasonable. In a situation where the price of crude goes as high as it is right now, it is not the most favourable for a modular refinery,” Idoko stated.
Earlier, local refiners and organised labour renewed calls for increased crude supply and lower fuel prices following confirmation that Nigeria’s oil production has risen to about 1.8 million barrels per day, saying higher output should translate into improved feedstock availability for domestic refineries and relief for consumers.
Idoko declared that refiners would intensify demand for more crude with the reported improvement in national production. The CORAN spokesman explained that consistent crude supply would improve refinery operations and profitability, noting that modular refineries would not make profits unless they get enough feedstock locally.
“If we get crude, of course, we will make gains; we have our cash flow. If we get regular products like we ought to do, yes, we would make gains. But without products, we are not making gains. If the oil producers give us feedstock, we will make gains. That’s how good the refining business is,” he said.
He added that improved crude supply would also benefit government revenues. “The Federal Government will make gains as well. The Federal Government will be able to come out to tell you how much it makes from the refineries that are producing now in the ways of taxes, levies, and charges,” Idoko said.
He added that pricing has been a major issue between producers and refiners, saying, “If I’m going to refine, I want to refine to make profits. For a modular refinery to break even, the pricing has to be reasonable.”
Meanwhile, sources within the NUPRC told our correspondent that pricing has always been an issue with local refineries, especially the Dangote refinery. They disclosed that oil producers want to make profits, considering their high cost of production. But Idoko insisted that the current price crude is offered to local refineries is high, demanding transparency.
