The Nigerian government has admitted the Dangote refinery is allowed to produce diesel with a higher sulphur content than importers are allowed to, but said the advantage aligned with standards approved by the West African regional bloc Ecowas.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) said local refiners will be allowed to deliver diesel with high sulphur content up to 650 parts per million (ppm) until January 2025.
High sulphur content in fuels contribute to air pollution and can damage engines. Diesel use is common in Nigeria as most big businesses rely on diesel-powered generators for electricity.
Nigeria imported much of its diesel until last month when the Dangote plant started production, and imports contained as high as 1,200ppm of sulphur, the NMDPRA said. Other sources say imported diesel contained up to 3,000ppm and perhaps more.
The regulator had set March 1 as the deadline for diesel brought into the country to have a sulphur content not exceeding 200ppm. It also said the sulphur limit for all oil products would gradually decrease to 50ppm but gave no timeline.
“Dangote advantage”
Last week, a report by S&P Global indicated the Dangote refinery was able to reduce its price because the government allowed the company to produce diesel containing as high as 650 ppm of sulphur.
Dangote started selling diesel at N1,200 per litre, reducing the price to N1,000 two weeks ago. It reduced it further to N940 on Tuesday.
The report acknowledged the company would be able to lower sulphur content as other units of the plant become operational.
“By permitting Dangote to sell diesel above the 200-ppm sulphur cap, the regulator has provided a route to market for early supplies from the refinery ahead of secondary unit start-ups for gasoline and low-sulphur diesel, deflating local fuel prices and clawing back revenue for the project,” it said.
The Dangote refinery is designed to meet Euro V specifications, meaning its fuels should contain no more than 10 ppm sulphur. Market participants say the refinery has not yet commenced operations for its secondary units, including desulphurization units, Argus reported.
The Dangote Industries Ltd. denied it lowered its price because its diesel was “substandard”.
“The false and misleading allegations made by some media outlets that the Dangote Refinery is producing substandard diesel which is why it reduced the price by 37 per cent, is baseless and mischievous,” spokesperson Anthony Chiejina said in a statement.
He said until late last year, diesel imports into Nigeria were up to 7,000 ppm of sulphur, and that Dangote Refinery was producing diesel at “significantly lower levels of Sulphur”. He did not say the exact amount.
Regulator speaks
The NMDPRA said allowing diesel with higher sulphur content for local refiners adhers to a 2020 agreement by the Economic Community of West African States (ECOWAS), Reuters reported Friday.
“So, a local refinery with a 650-ppm sulphur in its product is permissible and safe under the ECOWAS rule until January next year where a uniform standard would apply to both the locally refined and imported products outside West Africa,” Farouk Ahmed, the chief of NMDPRA, said.
ECOWAS regulation says that after January 2025 a uniform standard of below 5 ppm will apply to both domestically refined fuel and imports from the region.
Mr Ahmed said the implementation of lower sulphur levels for non-ECOWAS imports began in January 2021, but did not explain why Nigeria continued to permit sulphur levels exceeding a thousand ppm.
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