Dangote refinery has commenced temporary refining of white products from its asset in Lagos, following a delay in its production takeoff.
The refinery is currently importing crude oil and expects its first crude cargo in two weeks’ time, according to the executive director of Dangote Group, Devakumar Edwin. In an interview with S&P Global Commodity Insights on Monday, Edwin revealed that the Nigerian National Petroleum Company Limited (NNPCL) had committed its crude to other entities, however, he did not disclose the recipients.
Energy experts have called for measures to reduce Nigeria’s reliance on importations to meet domestic requirements, as inadequate production may be a factor leading Dangote to take this option.
Plans are already underway to ensure Dangote’s refineries’ crude oil needs are met in November, as the NNPC has entered into crude oil contracts with multiple entities, which initially made it impossible for the organization to meet Dangote’s needs.
Capt. Emmanuel Iheanacho, the former interior minister and chairman of the Board of Trustees of Crude Oil Refiners Association of Nigeria, CORAN, believes that Dangote may have considered the economic benefits of importing crude to run his business. He also pointed out that supply reliability is crucial to any business, and the shrinking crude production may be a contributing factor to Dangote’s decision.
However, Edwin clarified that the importation of crude by Dangote refinery is temporary, as the firm will receive supply from NNPCL starting from November. Dangote refinery plans to commence the production of up to 370,000 barrels per day of crude, which will result in the production of Automotive Gas Oil (diesel) and jet fuel by October 2023.
Public affairs analyst, Dan D Kunle, expressed concern over Nigeria’s poor and low investment in upstream oil and gas production, suggesting that it may lead to Nigeria importing crude oil to meet refinery needs in the next few years.
The Organization of the Petroleum Exporting Countries (OPEC) reviewed Nigeria’s oil production on September 13, and while Brent crude prices are rising, Nigeria has failed to significantly increase its oil production. In August, Nigeria reported a daily oil production of 1.4 million barrels, but analysts estimate the output drops to 1,181,133 barrels per day when condensate is excluded.
These statistics show that Nigeria is yet to meet its budget benchmark for 2023 of 1.69 million barrels per day. On the other hand, the non-oil sector has experienced substantial recovery, as highlighted in the latest OPEC report. However, Nigeria’s oil sector lacks significant investments, and stakeholders are battling crude oil theft.
Edwin confirmed that the Dangote refinery will purchase Nigerian oil in US dollars, not naira, due to its location in a free trade zone on the outskirts of Lagos. The NNPC will supply some crude at discounted prices due to its equity stake in the refinery. The Dangote refinery has the ability to process most African crude grades, as well as Middle Eastern Arab Light and even US light-tight oil.
The refinery aims to produce petrol by November 30, 2023. Oil marketers believe that the prices of diesel and jet fuel will only decrease when the Dangote refinery starts receiving crude oil from Nigeria, rather than importing it.
The refinery’s operations will establish a reliable supply of environmentally-friendly refined products and bring a significant amount of foreign exchange into the country, according to Edwin. The revenues generated will be reinvested for further development, demonstrating Aliko Dangote’s commitment to Nigeria.