Dangote Oil Refinery to Process 400,000 bpd of Nigerian Crude, Signaling Shift to Domestic Supply
By Okafor Joseph Afam
October 8, 2024
The Dangote oil refinery is gearing up to process up to 400,000 barrels of crude oil per day (bpd) over the next two months, with expectations to reach full capacity in the coming months. According to a cargo allocation list reviewed by Bloomberg, the 650,000-metric-ton capacity plant near Lagos is slated to receive approximately 24 million barrels of crude in October and November. This move marks a significant shift towards utilizing more domestic crude supplies.
Ronan Hodgson, a London-based analyst at FGE, informed Bloomberg that this increased demand from Dangote could substantially tighten the West African crude market in the fourth quarter of 2024. He cautioned that Nigeria’s crude exports might dip below one million barrels per day due to the refinery’s large intake.
Bloomberg further reported that some of these shipments could encounter delays, as October’s schedule includes two cargoes that were initially postponed from September. However, the volume projected for the upcoming months is notably higher than the refinery’s average intake of 255,000 barrels per day in the first half of the year, indicating Dangote’s gradual scaling of operations. Currently, the massive refinery operates at 60-70% capacity, with expectations to reach full capacity soon, according to Vartika Shukla, chairman of Engineers India Limited, the project management firm overseeing the facility.
The latest allocations suggest a decline in Dangote’s purchases of U.S. crude, as traders noted that earlier in the year, the refinery imported millions of barrels of West Texas Intermediate (WTI) Midland crude but later resold some of it and halted plans for further acquisitions. In a significant deal reached last month, Nigerian National Petroleum Corporation (NNPC) Limited agreed to supply crude to the refinery in exchange for exclusive rights to distribute the gasoline produced.
Experts believe that if Dangote continues to ramp up its processing rates, Nigeria may be on the verge of achieving its long-anticipated goal of reducing the costly imports of refined oil products. Hodgson remarked, “As the refinery boosts production, the need for gasoline and diesel imports in West Africa will diminish rapidly.”
In a related development, the NNPC is ending its monopoly on purchasing refined products from Dangote Refinery, allowing other fuel marketers to source petrol directly from the facility. Sources familiar with the situation told Premium Times that the NNPC will no longer serve as the sole off-taker, a strategic move designed to foster competition and enhance supply chain stability.
Marketers will now have the freedom to negotiate prices directly with Dangote Refinery based on market conditions, rather than relying on NNPC as an intermediary. An NNPC official confirmed this shift on Monday, stating, “Yes, it is true. We can no longer continue to bear that burden.”
Previously, when the Dangote Petroleum Refinery commenced petrol processing in September, the NNPC was the exclusive entity allowed to buy and resell to marketers, who subsequently distributed the products to end consumers. The NNPC announced that it would purchase petrol from Dangote at N898.78 per litre and sell it to marketers at N765.99 per litre, incurring a subsidy of nearly N133 per litre.
As Dangote’s operations expand and the Nigerian market adapts to these changes, the landscape of crude oil processing and distribution in the country is set for a significant transformation.
