Nigeria’s Dangote Refinery is set to receive a massive boost with the Federal Government’s plan to supply up to 400,000 barrels of crude oil daily under the naira-for-crude agreement. This significant development, reported by Bloomberg, will take place over the next two months, totalling 24 million barrels of Nigerian supply between October and November 2024.
The increased processing capacity will have substantial implications for the refinery’s operations and the local oil industry, transforming the region’s import and export markets. Dangote’s reliance on local feedstock will disrupt the Atlantic oil market, decreasing Nigeria’s crude exports. The 650,000-barrel-a-day plant, the largest in Africa and Europe, will claim 13 to 14 shipments from Nigeria’s typical monthly program of about 50 cargoes.
Key Implications:
- Tighter West African Crude Market: The supply to Dangote will make the West African crude market “substantially tighter” in the fourth quarter, according to Ronan Hodgson, a London-based analyst at FGE.
- Reduced Nigerian Exports: The volumes could send Nigerian exports below 1 million barrels a day.
- Increased Domestic Production: Dangote is already running at 60-70% capacity and will reach its full rate within months.
- Curbing Oil Product Imports: If Dangote’s ramp-up continues, Nigeria could realize its goal of curbing costly oil product imports.
This development follows the announcement of the naira-for-crude deal commencement and the Nigerian National Petroleum Company Limited’s plan to supply crude oil in naira to the Dangote Petroleum Refinery, with three more refineries set to start producing Premium Motor Spirit.
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