Dangote Refinery Plans to Launch Trading Division
Aliko Dangote, Africa’s wealthiest individual, is gearing up to establish an oil trading arm, potentially headquartered in London, to oversee crude and product supply operations for his new refinery in Nigeria, according to six sources familiar with the matter.
This strategic move aims to diminish the reliance on major trading firms, which have been engaged in protracted negotiations to provide financing and crude oil for the refinery in exchange for product exports. With a colossal capacity of 650,000 barrels per day, the refinery is poised to reshape global oil and fuel dynamics, drawing keen interest from the trading community regarding its operational framework.
Despite numerous requests for comment, Dangote, whose wealth is estimated at $12.7 billion by Forbes, has not responded.
Companies such as BP, Trafigura, and Vitol have held discussions with Dangote in both Lagos and London, offering loans amounting to $3 billion in working capital required by the refinery for procuring substantial quantities of crude oil, according to trading sources cited by Reuters.
While the traders proposed repayment through fuel exports, no agreements have been finalized as Dangote is concerned about potential dilution of his control over the project, which could impact profitability, sources disclosed. Dangote has also engaged with state-backed entities in his quest for financial resources and crude oil.
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“He is inclined towards managing it independently,” remarked an industry source to Reuters. The trading division will reportedly be spearheaded by former Essar trader Radha Mohan, who joined Dangote in 2021 as the director of international supply and trading, as indicated by his LinkedIn profile. Sources indicated that the team is in the process of recruiting two additional traders.
Despite a nearly decade-long construction period and costs exceeding $20 billion, approximately $6 billion over budget, the refinery has begun operations, refining approximately 8 million barrels of oil between January and February. It is anticipated to reach full capacity over the coming months. Sources revealed that Vitol has pre-paid for certain product cargoes to assist the refinery in crude oil procurement, while Trafigura has engaged in crude oil swaps in exchange for future fuel cargoes. Both Vitol and Trafigura declined to comment on the matter.
Source: Reuters
