THE CABLE
Relaxed quality controls for diesel at the Dangote refinery resulted in reduced domestic prices, S&P Global is reporting.
According to a report on Thursday by S&P Global, high-sulphur diesel from the Dangote refinery led to the decision by the refiner to lessen domestic prices by 37 percent.
Low-sulphur diesel is below 500 ppm, and is considered cleaner for the environment; while high-sulphur diesel is used for off-road purposes because it causes progressive damage to the engine of machinery.
On April 16, Dangote refinery said it had reduced the price of automotive gas oil (AGO), also known as diesel, to N1,000 per litre.
The publication said more relaxed quality controls for the diesel supply have helped to undercut imports.
The report said three market sources confirmed the refinery’s first diesel supplies have been marketed with a sulphur content of around 650 parts per million (ppm) — higher than the 200 ppm cap that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has enforced on imported product 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.
Analysts quoted in the report said previously, the “refiner announced intentions to supply products conforming to Euro 5 specifications (10ppm diesel), but its low sulfur diesel production remains contingent on the start-up of its key distillate hydrocracker unit”.
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”.
“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.
The publication said neither Dangote nor the NMDPRA were available for comment on the quality of supply from the refinery nor the permitted sulphur cap.
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