Dangote Refinery Turns to US for Crude Supply Amid Nigerian Production Challenges
Amidst Nigeria’s ongoing struggles with crude oil production challenges, the Dangote Mega Refinery in Lagos has set its sights on securing crude supply from the United States. With plans to procure millions of barrels of US crude within the next year, the refinery aims to address domestic supply constraints and boost processing rates.
Led by Africa’s wealthiest individual, Aliko Dangote, the refinery has initiated a term tender for the acquisition of 2 million barrels per month of West Texas Intermediate Midland crude, spanning a 12-month period starting in July. This strategic move underscores the refinery’s significant impact on global crude and fuel trading dynamics, as revealed through documents obtained by Bloomberg.
Elitsa Georgieva, executive director at Citac, highlighted the challenges associated with Nigerian crude supply and the attractiveness of more reliable and cost-effective alternatives like WTI crude. The diversification of feedstock procurement enhances the refinery’s flexibility and strategic maneuverability, rendering the tender economically viable for Dangote.
Despite Nigeria’s membership in OPEC+, the country has struggled to meet its production quota for over a year. April’s crude and liquids production fell significantly below capacity, attributed to factors such as theft, aging infrastructure, insufficient investment, and divestments by major oil companies.
In response to local supply challenges, Nigeria’s upstream regulators have introduced draft rules mandating oil producers to prioritize selling crude to domestic refineries. However, the Dangote refinery, operating at approximately half its capacity, is capitalizing on the cost advantages of US oil imports, utilizing them for up to one-third of its feedstock.
Since the beginning of the year, the refinery has been receiving monthly shipments of approximately 2 million barrels of WTI Midland crude, showcasing its reliance on US supply to complement domestic sources. This strategic shift underscores Dangote’s commitment to maintaining operational efficiency and overcoming Nigeria’s production hurdles.
In light of ongoing challenges in Nigeria’s oil sector, the Dangote Mega Refinery’s move to procure US crude signifies a pragmatic approach to securing reliable feedstock and sustaining operations amidst evolving market dynamics.
Source: Premium Times
