Nigeria’s Dangote to buy millions of US oil barrels

Nigeria (Commonwealth) _ In an indication of the difficulties Africa’s biggest oil producer confronts in increasing its own oil output, Nigeria’s recently constructed Dangote mega refinery outside Lagos plans to purchase millions of barrels of US crude over the course of the next year as it increases processing rates.

According to a document, the facility, which was constructed by the richest man in Africa, Aliko Dangote, released a so-called term tender for the purchase of 2 million barrels of West Texas Intermediate Midland crude each month for a period of 12 months beginning in July. On May 21, the tender closes.

The need for US oil demonstrates the plant’s significant impact on world crude and fuel commerce. It also shows how difficult it is for Nigeria to increase its own oil output, which is still much below theoretical capability, and how eager Dangote is to access less expensive sources than it can find domestically.

The executive director of Citac, an energy consulting firm that focuses on the African downstream market, Elitsa Georgieva, stated that the supply of Nigerian oil is either insufficient or unavailable and occasionally unpredictable. Conversely, WTI is affordable, readily available, and has a consistent supply.

The tender makes financial sense for Dangote as purchasing several feedstocks gives the refinery flexibility and options, according to Georgieva. For the last year at least, Nigeria has not been able to satisfy its OPEC+ quota.

In April, the country produced around 1.45 million barrels of oil and liquids per day, which is still significantly less than its projected 2.6 million barrels per day production capability. Declining output has been caused by a number of factors, including crude theft, old oil pipelines, poor investment, and divestitures by oil majors operating in the West African nation.

Nigeria’s upstream authorities announced new draft guidelines this month that would force its oil producers to sell crude to domestic refineries, ensuring sufficient local supply to the massive 650,000 barrel-a-day Dangote plant.

Up to a third of the plant’s feedstock comes from cheaper US oil imports, which it is now using at approximately half capacity. It has received at least one supertanker a month since the beginning of this year, transporting around 2 million barrels of WTI Midland.

In 2017, Africa’s wealthiest individual, Aliko Dangote, set out to accomplish two goals at once when he started construction of a $20 billion petroleum refinery close to Lagos, the country’s economic hub. By processing 650,000 barrels of petroleum per day—more than a quarter of the country’s daily production at the time—the refinery was expected to increase Nigeria’s export value. It would also eliminate decades of fuel import dependency by satisfying all domestic demand and conserving valuable foreign cash. One of the factors that convinced President Bola Tinubu to remove gasoline subsidies when he took office a year ago was the refinery’s imminent opening.

For starters, there hasn’t been enough Nigerian oil supplied to the Dangote Refinery. In order to sustain the daily refining of 350,000 barrels per day in the initial phase of production, additional suppliers were expected to quickly follow up on the first supply of 1 million barrels shipped in by Shell International Trading and Shipping Company last December. The goods did not show up as planned.

Professor of petroleum economics at the university in Port Harcourt, the southern oil center of Nigeria, Chijioke Nwaozuzu claims that “Nigeria’s oil supply has been unreliable for quite some time now.” “Dugote had to look elsewhere because oil theft is a major source of loss for Nigeria’s production.”

Aliko Dangote, the richest man in Africa and president of the Dangote Group, has previously promised that Nigeria will not need to import gasoline starting in July 2024 if the Dangote Refinery’s plans are followed.

Dangote added that his refinery can meet the demand for aviation fuel on the continent as well as the demands of gasoline and diesel in West Africa. At the Africa CEO Forum Annual Summit in Kigali on Friday, the businessman made this remark and expressed hope for the continent’s energy environment to change.

“As of now, Nigeria has no reason to import anything other than gasoline, and by the middle of June, Nigeria shouldn’t import any gasoline at all—not even a single liter.” He also described the steps the oil business has taken to guarantee that Africa as a whole achieves energy self-sufficiency.