According to a Bloomberg story on Monday, the Federal Government has agreed to supply the Dangote refinery with up to 400,000 barrels of Nigerian crude oil per day as part of the naira-for-crude agreement.
According to the statement, this major breakthrough is anticipated to occur over the course of the next two months, translating into a delivery of 24 million barrels from Nigeria between October and November of 2024.
The refinery’s operations as well as the regional oil sector may be significantly impacted by this increase in processing capacity, which could change the import and export markets in the area.
The Federal Government’s statement that the naira-for-crude agreement has begun is the latest step.
The Nigerian National Petroleum Company Limited is scheduled to start supplying crude oil in naira to the Dangote Petroleum Refinery this week, and three other refineries are scheduled to start producing Premium Motor Spirit.
Cargo allocations examined by Bloomberg News indicate that Dangote’s growing reliance on domestic feedstock may significantly reduce Nigeria’s crude exports, upsetting the Atlantic oil market.
Larger than any other factory in Africa or Europe, the 650,000 barrel per day plant will receive 13 to 14 ships from Nigeria’s normal monthly program of roughly 50 cargoes.
Due to the supply to Dangote, the West African crude market is expected to be “substantially tighter” in the fourth quarter, according to FGE analyst Ronan Hodgson, who is based in London.
According to him, the numbers might even push Nigerian exports below a million barrels per day.
Over the following two months, several shipments might not arrive as scheduled, and October’s list contains two cargoes that are already behind schedule from September.
Nevertheless, according to statistics collated by Bloomberg, the scheduled volume is far more than the average of 255,000 barrels per day of Nigerian oil that Dangote imported during the first half of the year as it progressively increased processing.
Vartika Shukla, the chairman of project management company Engineers India Ltd., stated last month that Dangote is currently operating at 60–70% capacity and will achieve its full rate in a few months.
According to dealers, the most recent allocations also imply that Dangote has kept its purchases of US crude to a minimum.
Millions of barrels of WTI Midland were imported by the refinery earlier this year; however, it later sold some of the oil and abandoned plans to purchase more.
Last month, Nigerian National Petroleum Co. and Dangote came to an arrangement wherein the nation’s state-owned energy company will provide oil in exchange for having exclusive distribution rights for the refinery’s vital gasoline output.
In the upcoming months, Nigeria may begin to achieve its long-standing objective of reducing expensive imports of oil products if Dangote’s ramp-up proceeds as planned.
According to Hodgson of FGE, “the West African market for gasoline and diesel imports will shrink extremely quickly if the refinery runs at higher rates.”
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