Dangote refinery recently announced a price reduction of automotive gas oil to N1,000 per litre. This is attributed to a less quality control checks, S&P findings reveal.
In the report, high-sulphur diesel from the refinery contributed to the price reduction, contrasting with the environmentally preferable low-sulphur diesel, according to Businessday.
The report reveals that the diesel supplies have a significant sulphur content of around 650 parts per million, beyond the 200 ppm cap imposed by the Nigerian Midstream and Downstream Petroleum Regulatory Authority on imported products since March.
“By permitting Dangote to sell diesel above the 200 ppm sulfur 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-sulfur diesel, deflating local fuel prices and clawing back revenue for the project,” the report said.
S&P Global said the refiner has been pressured to alleviate surging fuel import costs amid the rapid depreciation of the naira, “which has seen diesel prices nearly double year on year”.
S&P Global reported that, due to the sharp depreciation of naira, which has almost doubled diesel prices year on year, refiners have been forced to cut down on the rising fuel import costs.
“While the price of gasoline has remained comparatively stable thanks to suspected government subsidies, concerns of a rising debt burden have added pressure to accelerate supplies from the refinery,” the report said.
In the publication, neither Dangote nor the NMDPRA could be reached for comment regarding the quality of supply from the refinery or the permitted sulphur cap.
According to S&P Global, the increased availability of cheaper Dangote diesel in West Africa has created uncertainty for traders as they are faced with rapidly changing specifications.
“Last month, high sulfur gasoil flows were dramatically reshaped by new Nigerian import requirements reducing sulfur limits from 0.3 percent (3,000 ppm) to 200 ppm, while officials have hinted at further reductions.
“Meanwhile, it remains unclear whether Dangote will reduce the sulfur content of its domestic diesel supplies, or if imports will consistently be held to higher quality standards,” S&P Global said.
