The 650,000 barrels per day Dangote Petroleum Refinery is taking advantage of cheaper oil imports from the United States for as much as a third of its feedstock as it starts up production.
According to a report published by Bloomberg on Thursday, the plant has been shipping goods while preparing two units for gasoline (petrol) output, which will bring about the long-awaited transformation of the fuel market in Nigeria and the surrounding area. It credited analysts for this.
“Dangote is going to influence Atlantic Basin gasoline markets this summer and for the rest of the year,” said Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at the consultancy firm, Wood Mackenzie as quoted in the Bloomberg report.
He added, “When the RFCC comes online, that’ll really shake things up because it alters the West African gasoline supply balance,” referring to a residue fluid catalytic cracking unit that upgrades heavier products.
The average estimate of analysts at WoodMac, FGE, and Citac is that the refinery is operating at about 300,000 barrels per day, or nearly half its capacity.
“The refinery is already having a sizable impact on product markets even running in its most stripped back form at minimum rates,”
stated FGE energy analyst Ronan Hodgson. In the upcoming months, units that improve diesel quality will also come online.
According to shipping data compiled by Bloomberg, up to one-third of the oil shipped into the massive refinery thus far has been US grade WTI Midland. According to Hodgson, that will probably continue as long as the cost of foreign oil is less than that of local supplies.
Dangote could be about to change that.
Nigeria is trying to reduce its dependency on imported refined goods, so earlier this week it released new regulations forcing its oil producers to sell crude to domestic refineries. The exact amount that each refinery will require is still unknown.
The largest oil refinery in Africa, valued at $19 billion, was reportedly planning to import crude from the US earlier in January. This indicates how competitive American barrels have become on the international market.
For delivery by the end of February, Trafigura Group sold the massive refinery Dangote 2 million barrels of WTI Midland, marking the first time the refinery had bought non-Nigerian crude, according to traders.
