Dangote Refinery Poised to Slash Africa’s $17 Billion European Oil Imports, Threatening Foreign Refineries
Nigeria’s Dangote oil refinery is on track to significantly reduce the annual $17 billion gasoline import bill from Europe to Africa, posing a challenge to European refineries facing increasing competitive pressures. A recent Reuters report indicates that the full operational capacity of the refinery could lead to the closure of several smaller European refineries unable to compete in the European and US markets.
With a refining capacity of 650,000 barrels per day (bpd) and commencing production in January after a construction cost of $20 billion, the Dangote Refinery is set to become one of the largest refineries in both Africa and Europe upon reaching full capacity, expected either this year or next.
Dangote Refinery to Alleviate Africa’s Oil Import Dependency from Europe
In 2023, approximately one-third of Europe’s average gasoline exports, totaling 1.33 million barrels per day (bpd), were directed towards West Africa, with Nigeria being the primary recipient, as per data from Kpler.
Despite Nigeria being Africa’s most populous country and a leading oil producer, it still imports almost all of its fuel due to inadequate refining capacity.
Eugene Lindell, FGE’s head of refined products, noted, “The loss of the West African market will be problematic for a small set of refineries that do not have the capability to upgrade their gasoline to European and U.S. standards,” speaking to Reuters. Additionally, Andon Pavlov of Kpler mentioned that 300,000 to 400,000 bpd of Europe’s refining capacity might face closure due to increased global gasoline production.
The Struggling Landscape of European Refineries
Apart from the imminent competition from the Dangote refinery supplying oil and energy to Nigeria and neighboring African countries, European refineries have faced challenges maintaining profitability for years due to market fluctuations and declining global demand for fossil fuels.
Concawe data reveals that about 30 European refineries have closed since 2009, leaving roughly 90 operational facilities of varying sizes and complexities. IIR consultancy data highlights a loss of 1.52 million bpd of operational crude distillation since 2016, mainly occurring during the COVID-19 pandemic due to reduced demand.
Implications for Nigeria’s Oil and Gas Sector
As imports from West Africa decrease, coinciding with new environmental regulations in Northwest Europe, refineries in the region face tough choices: adapt operations, seek new markets for lower-quality gasoline, or shut down operations.
The inauguration of the $20 billion Dangote refinery signifies a monumental step towards Nigeria’s energy independence in the oil and gas sector. Owned by Aliko Dangote, Africa’s wealthiest individual, the refinery’s capacity to produce 53 million liters of gasoline daily (around 300,000 bpd) underscores its transformative impact on regional and global energy dynamics.
