Dangote’s crude grab to shake up oil markets

DANGOTE oil refinery is due to take in up to 400 000 barrels a day of Nigerian crude over the coming two months as Africa’s largest plant transforms the region’s import and export markets.

The giant refinery outside Lagos is scheduled to take delivery of about 24 million barrels of Nigerian supply in October and November, as it increasingly turns to local feedstock, according to a list of cargo allocations seen by Bloomberg News.

Years behind schedule, Dangote will upend the Atlantic oil market by significantly reducing Nigeria’s crude exports.

The 650 000-barrel-a-day plant — larger than any other in Africa or Europe — will claim 13 to 14 shipments from Nigeria’s typical monthly programme of about 50 cargoes.

The West African crude market is set to be “substantially tighter” in the fourth quarter because of the supply to Dangote, said Ronan Hodgson, a London-based analyst at FGE.

The volumes could even send Nigerian exports below 1 million barrels a day, he said.

Some shipments over the next two months may not be delivered as planned, and October’s list includes two cargoes already delayed from September.

Still, the scheduled volume is significantly larger than the average 255 000 barrels a day of Nigerian oil taken in by Dangote over the first half of the year as it gradually ramped up processing, data compiled by Bloomberg show.

A spokesperson for Dangote didn’t respond to requests for comment.

Dangote is already running at 60-70 percent capacity and will reach its full rate within months, project management firm Engineers India Ltd chairperson Vartika Shukla said last month.

The latest allocations also suggest that Dangote has continued to curtail its buying of US crude, according to traders.

Earlier this year, the refinery imported millions of barrels of WTI Midland, before re-selling some of the oil and scrapping plans to buy more. Nigerian National Petroleum Co reached an agreement with Dangote last month under which the country’s state-owned energy firm will supply crude in return for being the sole distributor of the refinery’s crucial gasoline production.

If Dangote’s ramp-up continues to advance in the coming months, Nigeria could start to realise its long-held goal of curbing costly oil product imports.

“If the refinery runs at higher rates, the West African market for gasoline and diesel imports will shrink extremely quickly,” FGE’s Hodgson said. — Bloomberg