Dangote refinery seeks US crude boost
Nigeria’s recently established Dangote mega refinery, situated near Lagos, is aiming to procure millions of barrels of US crude within the upcoming year as it accelerates its processing operations, Bloomberg reported.
This move underscores the hurdles faced by Africa’s largest oil producer in augmenting its own oil production.
The refinery, spearheaded by Africa’s wealthiest individual, Aliko Dangote, has issued a formal tender for the acquisition of 2 million barrels per month of West Texas Intermediate Midland crude, spanning a 12-month period commencing in July. This initiative, as disclosed in a document obtained by Bloomberg, is slated to close on May 21.
The decision to source US oil underscores the substantial impact the refinery will exert on global crude and fuel trading. Moreover, it underscores Nigeria’s ongoing struggles to bolster its crude production, which continues to lag significantly behind its potential capacity. A key factor motivating this move is Dangote’s inclination to access more cost-effective supplies than those available domestically.
Elitsa Georgieva, executive director at Citac, a specialised energy consultancy focusing on the African downstream sector, remarked, “Supply of Nigerian crude is insufficient or unavailable and sometimes unreliable,”
“WTI on the other hand, is available, with reliable supply and competitively priced.”
Opting for diverse feedstocks also furnishes the refinery with flexibility and strategic alternatives, rendering the tender a judicious economic decision for Dangote, according to Georgieva.
Nigeria has consistently fallen short of meeting its OPEC+ quota for over a year. In April, the nation’s crude and liquids production amounted to approximately 1.45 million barrels per day (bpd), a figure significantly below its estimated production capacity of 2.6 million barrels per day.
Challenges such as crude theft, aging oil infrastructure, diminished investment, and disinvestments from major oil players operating in the region have collectively contributed to this decline.
To ensure an adequate local supply for the expansive 650,000 barrel-per-day Dangote refinery, Nigeria’s upstream regulators recently introduced new draft regulations compelling oil producers to prioritise selling crude to domestic refineries.
Operating at roughly half its capacity presently, the refinery is leveraging the opportunity to import cheaper US oil to fulfill up to one-third of its feedstock requirements. Since the onset of the year, it has been receiving at least one supertanker carrying approximately 2 million barrels of WTI Midland each month.
An official from Dangote declined to offer comments on the matter.
