Nigeria’s Dangote Refinery Begins Local Supply of Petroleum

Nigeria’s long-awaited Dangote oil refinery has commenced supplying petroleum products to the local market, marking a significant milestone in the country’s journey toward energy independence. The refinery, situated on a peninsula near Lagos, was constructed at a cost of $20 billion by Aliko Dangote, Africa’s wealthiest individual, and represents the largest refinery project on the continent.

With a refining capacity of up to 650,000 barrels per day (bpd), the Dangote refinery is poised to become the largest in both Africa and Europe upon achieving full operational capacity, expected later this year or in the next. Devakumar Edwin, an executive at the Dangote Group, confirmed the shipment of diesel and jet fuel into the local market, highlighting the substantial quantities being evacuated by sea and road.

Edwin elaborated on the logistics, stating that ships are queuing up to load petroleum products, with vessels typically loading a minimum of 26 million liters, although efforts are made to accommodate vessels with capacities of up to 37 million litres to facilitate operations.

Local oil marketers have reached agreements on pricing, with the Independent Petroleum Marketers Association of Nigeria settling on a price of 1,225 naira ($0.96) per litre of diesel following a bulk purchase deal. Abubakar Maigandi, the association’s head, disclosed that its members oversee approximately 150,000 retail stations across Nigeria.

Similarly, the Depots and Petroleum Products Marketers Association of Nigeria is in the process of securing letters of credit to procure petroleum products from the Dangote refinery. Femi Adewole, the association’s executive secretary, confirmed the advanced stages of discussions with banks, indicating that once letters of credit are obtained, product lifting will commence.

The Dangote refinery’s significance extends beyond meeting Nigeria’s domestic fuel demands. It represents a pivotal shift away from the country’s historical reliance on imported petroleum products despite being a leading oil producer. With its operationalization, Nigeria aims to achieve greater self-sufficiency in meeting its energy needs and reduce its dependence on costly imports, marking a significant step toward energy independence.

In 2023, about one-third of Europe’s average gasoline exports, totalling 1.33 million barrels per day (bpd), were sent to West Africa, with Nigeria being the primary destination, according to Kpler data.

Eugene Lindell, FGE’s head of refined products, noted that the loss of the West African market could pose challenges for European refineries unable to meet stricter environmental standards. Around 300-400,000 bpd of European refining capacity is at risk of closure due to increased global gasoline production, as stated by Kpler analyst Andon Pavlov.

Since 2009, approximately 30 European refineries have closed, with nearly 90 still operational, according to Concawe data. Competition from newer plants in the Middle East and Asia, as well as the impact of the COVID-19 pandemic, have contributed to closures. Europe’s operational crude distillation capacity has decreased by 1.52 million bpd since 2016, with most of the decline occurring in 2021 and 2022, per IIR data.

Despite producing insufficient diesel, European refineries generate excess gasoline, relying on exports to balance supply. West Africa remains a key destination for European gasoline exports due to less stringent environmental regulations. In 2023, this trade totaled $17 billion, based on price data from Argus Media and Reuters calculations.