Taking advantage of cost-effective oil imports from the United States for approximately a third of its feedstock, the Dangote Petroleum Refinery, with a capacity of 650,000 barrels per day, is now in the process of scaling up its production.
According to a recent report by Bloomberg, the refinery has commenced shipments of products in recent weeks while preparing two units to facilitate gasoline production, which is anticipated to bring about significant changes in the fuel market landscape in both Nigeria and the wider region, as per analysts’ assessments.
Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie consultancy firm, expressed that “Dangote is poised to impact the Atlantic Basin gasoline markets during the upcoming summer and beyond.”
Referring to a residue fluid catalytic cracking unit crucial for upgrading heavier products, Gelder added, “When the RFCC becomes operational, it will significantly alter the West African gasoline supply dynamics.”
As per estimates by analysts at WoodMac, FGE, and Citac, the refinery is currently operating at around 300,000 barrels per day, which is nearly half of its full capacity.
The facility has initiated the shipping of jet fuel, gasoil, and naphtha as it expands its product portfolio.
Wood Mackenzie foresees the gasoline-focused units coming online in the summer, with other experts predicting the RFCC’s commissioning by year-end.
Earlier this month, Dangote Industries announced the commencement of gasoline deliveries in May, although no immediate response was provided by a company representative to inquiries.
Energy analyst at FGE, Ronan Hodgson, highlighted, “Even at its minimal operating capacity, the refinery is already exerting a significant impact on product markets.” He mentioned that diesel quality-enhancing units are also set to commence operations in the ensuing months.
In a notable move, Dangote Refinery recently lowered the price of diesel from N1,200/litre to N1,000/litre, a decision that has generated enthusiasm among stakeholders in the downstream oil sector.
Publicized through a statement from spokesperson Tony Chiejina, the refinery’s announcement stated, “This substantial reduction in diesel price is expected to have positive ramifications across various sectors of the economy, ultimately contributing to a reduction in the prevailing inflation rate.”
Shipping data compiled by Bloomberg revealed that up to one-third of the oil supplied to the refinery has been sourced from the US, specifically US-grade WTI Midland. This trend is likely to persist as long as foreign oil remains more cost-effective than local supplies.
Recent regulations by Nigeria now mandate domestic oil producers to allocate a portion of their crude to local refineries, aiming to diminish the nation’s dependence on imported refined products. The specifics regarding the required quota for each refinery are yet to be determined.
Additionally, the Nigerian government’s decision to permit refineries to procure crude using either the local currency, naira, or the US dollar, accompanies the directive to sell crude to indigenous refiners.