Background
Elder statesman and former Chairman of the Presidential Advisory Committee Against Corruption (PACAC), Prof. Itse Sagay (SAN) on Wednesday said it is surprising that the newly operational Dangote Refinery has decided on producing diesel and aviation fuel while neglecting petrol which is the most needed by Nigerians.
Dear Prof Itse Sagay (SAN),
Humongous greetings to you sir.
Your observation that Dangote is producing Diesel and not PMS has been highlighted and analyzed on Federalist Majority Platform, a leading Pro Nigeria movement.
While you statement that Dangote is producing Diesel (AGO) is correct, your conclusion that Dangote is not producing PMS (Petrol) is not correct.
Crude oil refining is a distillation process and PMS is distilled before AGO (Diesel).
In other words, you cannot produce Diesel without producing PMS (Petrol) first.
So the fact is that Dangote refinery is producing both PMS, Aviation fuel and Diesel but is only delivering Aviation fuel and Diesel to the market by end of month.
The question that begs for answer is Why is Dangote not delivering PMS to the market in parallel with Diesel and Aviation fuel.
There are 2 possible reasons and at this point, i can only speculate.
1: Pricing:
As you know, PMS is currently secretly subsidised by NNPC at N568 ex-Lagos.
The per litre cost of Dangote PMS will be way above the NNPC subsidised price and it is therefore possible that the delay in delivering PMS to the market is because Government and Dangote refinery have not reached agreement on pricing of PMS.
In my opinion, I expect Dangote PMS to sell for between N850- N1000 per liter, taking into consideration current exchange rate and crude oil price.
This explains why Dangote has opted to deliver Diesel and Aviation fuel which are both fully deregulated. This is not a surprise.
- Potential oil subsidy scam.
A very unlikely outcome is that current PMS importers may buy Dangote PMS and offer to Nigerians as imported PMS. This scam will maximise their returns through savings on transportation, insurance, handling charges and storage.
Please note Dangote does not have infinite storage capacity for PMS that it is currently producing.
If Dangote and Government cannot agree on pricing, Dangote will sell to our current importers through the backdoor, opening a new dimension to oil subsidy scam in Nigeria.
Nigerians need both Diesel and PMS.
PMS will certainly cost more when Dangote delivers PMS to the market. Nigerians may see a 10-12% drop in price of Diesel when Dangote delivers .
The delivery of Dangote PMS will expose the hidden PMS subsidy which NNPC has denied and we know it is another Air Nigeria scam.
Closing:
Dangote Refinery cannot distill Diesel without first distilling PMS. PMS is lighter than Diesel and comes of the distillation cycle before the heavier Diesel which requires higher temperatures.
Why is Dangote not delivering PMS to the market in parallel with Diesel.
Time will tell.
Thank you sir and may you live long in good health.
Olufemi Adegbulugbe
Federalist Majority
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