Aliko Dangote
…Some European countries have banned exports of low-quality petroleum products from their hubs.
…Nigeria and Africa can become completely self-sufficient and replicate what Dangote Cement has done in petroleum products.
-Felix Douglas
In his keynote speech at the Crude Oil Refinery Owners Association of Nigeria (CORAN) summit which was held in Lagos, Aliko Dangote pointed out clearly that despite being the largest producer of crude oil in Africa, Nigeria has for decades largely depended on imports to meet its refined petroleum product needs. But presently, the table has turned as the country is poised to transition from a “net importer” to a “net exporter” of refined petroleum products, and firmly establish itself as an emerging global player in downstream trade flows.
He was represented by Mansur Ahmed, Advisor to President/CE of Dangote Industries Limited.
Dangote is of the view that impending transformation of the industry is indicative of how far the country has gone as a nation and applauded President Bola Tinubu for his unwavering support.
He opined that 1.8 mbd of new refining capacity is coming on stream between 2024 and 2025. Aside from the Dangote Refinery (DR), a couple of new refineries are coming on stream. This include Dos Bocas Refinery in Mexico, Duqm Refinery in Kuwait, Yulong Refinery in China, and Sitra Refinery in Bahrain
According to Dangote, Europe is tightening environmental standards. Holland and Belgium have banned exports of low-quality petroleum products from their hubs. These low-quality products used to be destined for Africa. The ban has forced some refineries to consider upgrading their plants or find new outlets for their products. At the same time, carbon tariffs in Europe are expected to rise over time. From €0.15 per barrel in 2020, to €2.05 per barrel by 2030.
Aging population and adoption of EVs, is leading to slower demand growth in developed countries, especially for gasoline. Most of the demand growth is expected to come from developing regions like Africa.
Dangote stated further that as a result of these factors, margins are down and refiners are getting squeezed. Only the most efficient refineries will be well placed to weather these head winds. According to a Wood Mackenzie assessment, several refineries across Europe and China with a total capacity of 3.6 mbpd are likely to be shut down over the next couple of years. It was recently in the news that Scotland’s only refinery (Grangemouth) will be shutting down next year. Shell is converting its 7.5 million ton per annum refinery in Germany to a lubricant plant.
The opportunity in Africa
Dangote observed that Africa imports about 3 million barrels a day of petroleum products and half of this volume is imported by countries along the coast from Senegal to South Africa. These same countries produce over 3.4 million barrels per day of crude oil.
The imports come from Europe, Russia, and other parts of the world. In 2023 alone, this trade was estimated to be worth approximately $17 billion.
However, these markets will be more competitively served from Nigeria. Both the crude oil and the petroleum products will travel shorter distances. The logistics costs of a floating storage will be eliminated, and countries can purchase their petroleum product requirements.
“Nigeria and Africa can become completely self-sufficient and we can keep all the value on our shores. We have done it in Cement, and we can certainly do it for petroleum products.
It is worth noting that the Dangote Refinery already produces sufficient diesel and jet fuel to meet Nigeria’s demand. We recently started the production of PMS and will soon ramp-up to meet Nigeria demand. Our refined products have been exported to diverse markets, including Europe, Brazil, UK, USA, Singapore, and South Korea, among others.”
Notwithstanding, Dangote disclosed that to grab this opportunity, Nigeria will need to build 1.5m barrels per day of refining capacity. This will not be an easy feat and strong government support will be required to achieve it. Ensuring sufficient feedstock availability, the country needs to stop mortgaging crude. “It is unfortunate that while countries like Norway are putting oil proceeds into a future fund, in Africa we are spending oil proceeds from the future. We will also need to prioritise implementation of the domestic crude supply obligations.”
Dangote advised on expansion of crude oil production capacity to support demand from new refining capacity hence the government of President Tinubu is taking active steps to achieve this through fast tracking IOC divestments and other initiatives.
Global developments in the petroleum sector particularly in Europe will disrupt historical trade flows for refined petroleum products in Africa. Nigeria is uniquely positioned to take advantage of this opportunity and be a formidable player in the global oil industry. As a vibrant exporter of refined products, the country will witness an improvement in its balance of trade and generate much needed foreign currency.
Indeed, Nigeria’s potential as a refining hub is clearly not in doubt if stakeholders and industry players can work together.
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