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The Dangote Petroleum Refinery is presently engaged in crude oil imports and anticipates receiving its initial crude shipment in two weeks, as disclosed by Devakumar Edwin, the Executive Director of the Dangote Group. While the Nigerian National Petroleum Company Limited (NNPCL) manages crude oil trading for Nigeria, Edwin revealed in an interview with S&P Global Commodity Insights that NNPCL had allocated its crude to other parties.

The recipients of the refinery’s crude were not disclosed by Edwin, but last month, NNPC announced a $3 billion crude oil-for-loan arrangement with the African Export-Import Bank, enabling it to use future oil production for loan repayments. Additionally, NNPC had entered into crude oil contracts with multiple entities, preventing them from immediately meeting Dangote’s requirements.

However, there are plans underway to satisfy Dangote’s crude oil needs by November. Edwin assured that the refinery’s crude imports were temporary, as they would receive supplies from NNPCL starting in November.

Furthermore, the refinery aims to produce up to 370,000 barrels per day of crude, leading to the production of Automotive Gas Oil and jet fuel by October 2023. Premium Motor Spirit (petrol) production is slated to commence by November 30, 2023.

Oil marketers expect diesel and jet fuel prices to decrease only when Dangote refinery begins receiving Nigerian crude oil, rather than importing it.

Edwin emphasized the refinery’s readiness to receive crude oil, stating, “Right now, I’m ready to receive crude. We are just waiting for the first vessel. And so, as soon as it comes in, we can start.”

Regarding the delay in the original timeline, Edwin explained that NNPCL had already committed their crude oil to another entity on a forward basis, causing a temporary setback.

He mentioned that the delay was temporary, and starting in November 2023, the Dangote refinery would exclusively operate using Nigerian crude oil.

It was also reported in Abuja that NNPCL had made commitments to supply crude oil to other entities but would prioritize supplying it to the Dangote refinery in November.

In mid-August, the national oil firm announced securing a $3 billion emergency crude oil repayment loan from the African Export-Import Bank (AFREXIM Bank). The loan aimed to support fiscal and monetary policy reforms to stabilize the exchange rate market, with no crude-for-refined products swap involved.

During the recent S&P interview, Edwin clarified that Nigerian oil would be purchased in US dollars due to the refinery’s location in a free trade zone near Lagos. However, NNPCL would provide some crude at reduced prices due to its stake in the refinery.

Edwin also mentioned that besides heavy Angolan grades, the Dangote refinery could process various African, Middle Eastern, and even US crude grades if allowed. Approximately 50% of its production would meet the nation’s requirements, with excess gasoline, jet fuel, and diesel earmarked for export to various markets.

He emphasized the refinery’s significant benefits, such as providing environmentally-friendly refined products and contributing substantial foreign exchange to the country. Additionally, it would help alleviate fuel supply challenges in import-dependent West Africa, particularly given Nigeria’s removal of fuel subsidies, which had led to a fluctuating illicit gasoline market.

He added that the revenues generated from the refinery’s operations would be reinvested to fuel further developments, underscoring Aliko Dangote’s commitment to Nigeria.

“The money will be coming back in, and it will go for further investments. Aliko Dangote is from Nigeria and his focus is always on Nigeria,” Edwin stated.

Marketers react
Chief John Kekeocha, the National Secretary of the Independent Petroleum Marketers Association of Nigeria, voiced concerns about the prolonged delay in the Dangote refinery’s production of refined products. He expressed optimism that once the refinery begins receiving Nigerian crude oil from NNPCL for diesel and jet fuel production, it would lead to reduced costs for these commodities within Nigeria.

Kekeocha stated, “The prices of diesel and jet fuel will, of course, come down when Dangote starts refining in-country, provided it gets its crude oil from Nigeria. For the unit costs of importing the refined products will be removed, since we now produce them here.”

Other marketers expressed satisfaction with the news that the Dangote refinery would commence production in October.

Mike Osatuyi, the National Controller of Operations for IPMAN, noted that the commencement of petrol refining by the refinery in November would mark the end of petrol importation. He highlighted the positive impact on oil marketers, the public, and the Nigerian government, especially since the Federal Government holds a 20% stake in the refinery.

Efforts to obtain comments from Tony Chijiena, the Spokesperson for Dangote Group, were unsuccessful, as there was no response to calls and text messages seeking comments at the time of this report.

Dangote sources informed The PUNCH that while the CEO granted an interview to S&P, the company would respond officially through a press release at the appropriate time.

It was reported by The PUNCH last week that the refinery had not yet commenced production, despite Aliko Dangote’s promise that petrol from the facility would begin flowing into the Nigerian market by August.

Garba-Deen Muhammad, the former spokesperson of NNPCL, was among those who were retired by the firm on Wednesday. Efforts to obtain comments from the oil company officials on this matter were unsuccessful as they did not respond to inquiries.