Aliko Dangote is reportedly in the process of establishing an oil trading division, potentially situated in London, aimed at managing the crude and product supply chain for his upcoming refinery in Nigeria, according to six informed sources who spoke to Reuters.
This strategy is expected to diminish the influence of the largest trading companies in the world. These companies have been in discussions for an extended period, seeking to secure financing for the refinery and supply crude oil, in return for the rights to export its products.
The establishment of the massive 650,000 barrel-per-day refinery is anticipated to significantly alter global oil and fuel distribution patterns, making its operational approach a subject of keen interest among traders.
BP, Trafigura, and Vitol, among other entities, have recently engaged with Dangote in both Lagos and London, proposing loans to facilitate the approximately $3 billion in working capital required for the refinery to purchase substantial volumes of crude oil, according to trading sources who spoke to Reuters.
These trading firms have suggested that the refinery could use fuel exports as a means of repaying the loans.
However, no agreements have been finalized yet, as Dangote expresses concerns that such arrangements could diminish his control over the project and, potentially, his profits. In his pursuit of funding and crude oil, Dangote has also held discussions with state-supported companies.
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What you should know
The 650,000-barrel refining capacity Dangote refinery was commissioned in May last year but faced delays before starting operations.
However, in December 2023, the refinery began receiving crude oil in December from oil producers in Nigeria.
However, shortfall in oil production and other local supply disruptions have made the refinery look abroad for crude oil.
The refinery was reported in January to begin purchase of crude oil from producers abroad mainly in the United States.
The Nigeria Upstream Petroleum Regulatory Commission had earlier mandated oil companies operating in Nigeria to supply around 325,000 barrels of oil daily to the refinery.