Dangote Refinery sources one third of its feedstock from the United States, choosing more affordable oil as it increases production, according to a report by Bloomberg.
The latest report states that one out of every three barrels of feedstock at Dangote Refinery comes from the US.
Although Nigeria is a top crude oil producer in Africa, it struggles to fulfill its OPEC quota and domestic supply needs.
As a result, the Dangote Refinery has sourced up to a third of its oil from US grade WTI Midland, as per shipping data compiled by Bloomberg.
Moreover Ronan Hodgson, an energy analyst at FGE, observed that this trend is likely to persist as foreign oil remains cheaper than local supplies.
Hodgson also mentioned that units designed to enhance diesel quality in the oil firm are set to begin operations in the coming months.
- “The refinery is already having a sizable impact on product markets even running in its most stripped back form at minimum rates,” Hogson said.
Recommended reading: Dangote Refinery reduces diesel price to N1000/litre
NUPRC Policy may change Trend
Meanwhile, Nairemetrics reported that Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has mandated all oil companies in Nigeria to supply crude to domestic refineries that are unable to procure it locally.
- Only after fulfilling these domestic supply commitments are producers permitted to export crude.
- The NUPRC will serve as a middleman between local refiners and producers when agreements on crude supply cannot be finalized, helping to arrange a sales purchase agreement based on a willing-buyer, willing-seller model.
- The new policy could be advantageous for Dangote Refinery, allowing it to source crude oil from local suppliers instead of relying on imports.
- However, it’s not yet clear how much each refinery will need to take.
Dangote to Disrupt Atlantic Basin Gasoline Market
In addition, Nairemetrics reported that the 650,000 barrel per day refinery will begin supply of petroleum products, PMS, next month.
Industry players believe that the refinery will influence Atlantic Basin fuel markets.
For instance, Alan Gelder, Wood Mackenzie’s Vice President of Refining, Chemicals, and Oil Markets, stated that the startup of the refinery will significantly disrupt the West African gasoline supply balance.
- “Dangote is going to influence Atlantic Basin gasoline markets this summer and for the rest of the year.
- “When the RFCC comes online, that’ll really shake things up because it alters the West African gasoline supply balance,” he said.
Furthermore, the refinery is poised to slash the annual $17 billion gasoline importation from Europe to Africa, placing additional stress on European refineries threatened by rising competitive forces.
A Reuters report suggests that the full operational capacity of the refinery might force the closure of several small set European refineries, unable to withstand the competitive pressures in the European and US markets.
- “The loss of the West African market will be problematic for a small set of refineries that do not have the kit to upgrade their gasoline to European and U.S. specification,” consultancy FGE’s head of refined products Eugene Lindell told Reuters.
Recommended reading: Dangote Refinery may roll out PMS supply in May – Report
