Dangote Refinery Awaits Crude from NNPC Amidst Loan Swaps – The much-anticipated Dangote Petroleum Refinery, which promised to be a game-changer in Nigeria’s oil sector, is currently importing crude oil due to commitments made by the Nigerian National Petroleum Company Limited (NNPCL) with other entities. The refinery expects to begin its operations by October and is awaiting its first crude shipment in a fortnight.
Oil-for-Loan Deals Put Pressure on Local Supply
Recent $3 billion crude-for-loan deals, among others, have created a tight situation for local crude oil supply. The NNPCL, which manages crude oil trades for Nigeria, had earlier pledged its crude oil as collateral for a loan agreement with the African Export-Import Bank. This commitment to other entities has temporarily left Dangote Petroleum Refinery in a lurch.
The details of other entities involved in the crude oil contracts with the NNPC remain undisclosed. However, there is some good news for the Dangote Group, as an official from NNPCL confirmed that plans are in motion to meet Dangote’s crude oil requirements by November.
Dangote Refinery’s Upcoming Operations
Although the refinery is currently importing crude, this situation is temporary. From November, the refinery will receive its crude oil supply from NNPCL. The Dangote Group is gearing up for production, with plans to churn out up to 370,000 barrels per day. This production will lead to the creation of Automotive Gas Oil (diesel) and jet fuel by October 2023, and Premium Motor Spirit (petrol) by November 30, 2023.
Oil marketers have noted that prices of diesel and jet fuel will likely decrease once the Dangote refinery starts receiving crude from within Nigeria. The refinery’s eventual goal is to ramp up petrol production to an impressive 650,000 barrels per day by the end of November.
The International Scene
Dangote’s refinery has a broad spectrum when it comes to the type of crude it can process. This includes most African crude grades, Middle Eastern Arab Light, and even US light-tight oil. Edwin, from the Dangote Group, also hinted at the possibility of processing some Russian grades, given global circumstances.
Apart from catering to Nigeria’s needs, the refinery also has an eye on the international market. Excess gasoline will be exported to other African countries, the US, and South America. Meanwhile, jet fuel will find its way to Europe, and diesel will be distributed in sub-Saharan Africa.
The Bigger Picture
The Dangote Refinery promises to be a boon for Nigeria. It aims to provide a steady supply of eco-friendly refined products and bring in significant foreign exchange. The refinery will also play a crucial role in solving fuel supply issues faced by import-reliant West Africa, especially after Nigeria’s recent removal of fuel subsidies.
Edwin emphasized Aliko Dangote’s commitment to Nigeria, stating that the revenues generated would be reinvested for further developmental projects within the country.
Reactions from the Market
Oil marketers have voiced their anticipation regarding the Dangote refinery’s operations. The National Controller of IPMAN, Mike Osatuyi, remarked that the beginning of petrol refining by Dangote in November could signal the end of petrol importation in Nigeria. This is seen as a positive development for the Nigerian government, which holds a 20% share in the refinery.
However, some skepticism remains, as Dangote’s promise of petrol flowing into the Nigerian market by August hasn’t materialized yet. The reasons for this delay and other related matters are awaited from an official press release by the Dangote Group.
While the Dangote Refinery faces initial challenges in terms of crude oil supply, there is hope and much anticipation about its potential impact on Nigeria’s oil market and the broader economy.