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  • Business
  • Updated: April 19, 2024

Dangote Refinery explores cheap US crude

Dangote Refinery explores cheap US crude

The Dangote oil refinery is steadily gearing up its operations, prompting analysts and traders to closely monitor its progress to anticipate when it will begin supplying more petroleum products to the market.

With a capacity of 650,000 barrels per day, the Dangote plant is leveraging cheaper US oil imports for up to a third of its feedstock during its startup phase.

Recent weeks have seen the refinery shipping products while preparing two units to facilitate gasoline output, signaling a significant transformation in the fuel market within Nigeria and the broader region, according to analysts.

According to Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at consultancy Wood Mackenzie, "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."

The ramp-up of operations at the Dangote oil refinery holds implications not only for the local Nigerian market but also for the wider Atlantic Basin gasoline market, shaping supply dynamics and influencing pricing trends in the region.

The refinery is running at about 300,000 barrels a day, nearly half its nameplate capacity, according to the average estimate of analysts at WoodMac, FGE and Citac. The complex has started shipping jet fuel, diesel and naphtha as it widens to a full slate of products.  

Wood Mackenzie expects to see the gasoline-focused units to be online this summer, while other analysts expect the RFCC to take until the end of the year. Dangote Industries said earlier this month that petrol deliveries will start in May. A company spokesperson didn’t immediately respond to questions. 
 
“The refinery is already having a sizable impact on product markets even running in its most stripped back form at minimum rates,” said Ronan Hodgson, an energy analyst at FGE. Units that boost diesel quality will also start up in the coming months.

As much as a third of the oil shipped into the giant refinery so far has been US grade WTI Midland, according to shipping information compiled by Bloomberg. That’s likely to continue as long as the foreign oil undercuts the price of local supplies, Hodgson said.

Dangote could be about to change that. Nigeria released new rules earlier this week that will compel its oil producers to sell crude to domestic refineries in a bid to reverse the country’s reliance on imported refined products. It’s not yet clear how much each refinery will need to take.

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