Aliko Dangote
Amid crude oil production challenges from Nigeria due to theft and insurgency, Dangote Mega Refinery in Lagos will have to get crude supply from US.
The company has initiated plans to procure millions of barrels of US crude within the upcoming year to support its escalating processing rates.
The refinery, spearheaded by Africa’s wealthiest individual, Aliko Dangote, has issued a term tender for the acquisition of 2 million barrels per month of West Texas Intermediate Midland crude for a 12-month period starting in July. This development, disclosed through a document obtained by Bloomberg, signals the significant impact the refinery will have on global crude and fuel trading dynamics.
Nigeria’s ongoing struggles to enhance its crude production, coupled with Dangote’s inclination towards accessing more cost-effective supplies abroad, are highlighted by the call for US oil. Elitsa Georgieva, executive director at Citac, an energy consultancy specializing in the African downstream sector, emphasized the challenges faced with Nigerian crude supply, contrasting it with the availability and reliability of WTI crude.
The procurement of diverse feedstocks offers the refinery increased flexibility and strategic options, making the tender economically viable for Dangote, as stated by Georgieva.
Despite being a member of OPEC+, Nigeria has been unable to meet its quota for over a year. April’s crude and liquids production stood at approximately 1.45 million barrels per day, significantly lower than its estimated capacity of 2.6 million barrels per day. Factors such as crude theft, aging pipelines, inadequate investment, and divestments by major oil companies have contributed to this decline.
To address the challenge of local supply, Nigeria’s upstream regulators recently introduced draft rules compelling oil producers to prioritize selling crude to domestic refineries.
Operating at around half its capacity, the Dangote refinery is capitalizing on the cost advantages of US oil imports, utilizing it for up to one-third of its feedstock. Since the beginning of the year, the refinery has received at least one supertanker carrying approximately 2 million barrels of WTI Midland crude each month.
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