Dangote refinery to get 400,000 barrels of crude daily as Naira-for-crude deal begins
The Federal Government is set to deliver up to 400,000 barrels of Nigerian crude oil daily to the Dangote refinery under its naira-for-crude agreement, a report stated on Monday.
This significant development is expected to take place over the next two months, amounting to 24 million barrels of Nigerian supply between October and November 2024.
This increase in processing capacity could have substantial implications for both the refinery’s operations and the local oil industry, transforming the region’s import and export markets.
This new development follows the announcement by the Federal Government that the naira-for-crude deal has commenced.
It was also reported on Monday that the Nigerian National Petroleum Company Limited is set to begin supplying crude oil in naira to the Dangote Petroleum Refinery this week, with three more refineries scheduled to start the production of Premium Motor Spirit.
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According to cargo allocations, Dangote’s increasing reliance on local feedstock will disrupt the Atlantic oil market by substantially decreasing Nigeria’s crude exports.
The 650,000-barrel-a-day plant—larger than any other in Africa or Europe—will account for 13 to 14 shipments from Nigeria’s typical monthly program of about 50 cargoes.
The West African crude market is set to be “substantially tighter” in the fourth quarter due to the supply to Dangote, said Ronan Hodgson, a London-based analyst at FGE.
The volumes could even push Nigerian exports below 1 million barrels a day, he added.
Some shipments over the next two months may not be delivered as planned, and October’s list includes two cargoes that have already been delayed from September.
Still, the scheduled volume is significantly larger than the average of 255,000 barrels a day of Nigerian oil taken in by Dangote over the first half of the year as it gradually ramped up processing.
Dangote is already operating at 60-70 percent capacity and is expected to reach its full rate within months, according to Vartika Shukla, Chairman of project management firm Engineers India Ltd.
The latest allocations also suggest that Dangote has continued to reduce its purchases of U.S. crude, according to traders.
Earlier this year, the refinery imported millions of barrels of WTI Midland, before reselling some of the oil and scrapping plans to buy more.
The Nigerian National Petroleum Company reached an agreement with Dangote last month under which the country’s state-owned energy firm will supply crude in return for being the sole distributor of the refinery’s crucial gasoline production.
If Dangote’s ramp-up continues to progress in the coming months, Nigeria could begin to achieve its long-held goal of reducing costly oil product imports.
“If the refinery runs at higher rates, the West African market for gasoline and diesel imports will shrink extremely quickly,” FGE’s Hodgson said.
Proofreading by Uchechi Ojo, Sub-editor at Neptune Prime.
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