Federal Government owed refineries and the Dangote Refinery, could face a shortage of crude oil as the Nigerian National Petroleum Company Limited (NNPC) continues to repay massive loans tied to crude oil.
The NNPC has committed about 272,500 barrels of crude oil daily to repay debts from oil swap deals, raising concerns about whether local refineries will receive enough supply. These deals, worth $8.86 billion, were made to fund projects like refinery upgrades and oil production.
High Crude Demand from Local Refineries
Since the Port Harcourt, Warri, and Dangote refineries began operations, the demand for crude oil has surged. According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the three refineries require around 123.5 million barrels every six months. This increased demand puts pressure on the NNPC, which already uses millions of barrels for debt repayment.
Details of NNPC’s Crude-for-Loan Deals
NNPC’s loan agreements include:
- Project Panther: A $1.4 billion loan requiring 23,500 barrels daily until 2029.
- Project Eagle: Multiple loans, including a $935 million tranche that ended in 2023, with new loans requiring 30,000 barrels daily.
- Project Gazelle: A $3 billion loan secured in 2023, pledging 90,000 barrels daily, with repayments starting in 2024.
- Project Yield: A $950 million loan tied to the Port Harcourt Refinery, requiring 67,000 barrels daily until 2029.
Reports reveal that the NNPC has repaid $2.61 billion so far, leaving $6.25 billion outstanding.
Implications for Local Refineries
Experts warn that the NNPC’s loan commitments could impact crude oil supply to local refineries. The company already provides the Dangote Refinery with 300,000 barrels daily under a naira-for-crude deal. With the Port Harcourt and Warri refineries now operational, the NNPC faces tough decisions on how to balance supply among all the facilities.
The NNPC’s debt challenges also stem from foreign exchange shortages and past subsidy payments. These issues have increased pressure on the state oil company to meet its financial obligations while maintaining crude supply to local refineries.
Outlook
As the NNPC continues to grapple with its debts, stakeholders are urging the government to prioritise crude allocation to domestic refineries to ensure steady operations and reduce the country’s dependence on imported petroleum products.