The Dangote Refinery has made a significant leap by commencing the export of its refined products, opening new revenue streams for the mega refinery. This milestone comes as the refinery places a substantial order for approximately 24 million barrels of crude oil over the next 12 months.
For the first time, a cargo of Low-Sulphur Straight Run Fuel Oil (LSSR) produced at the 650,000 barrels-per-day facility has reached the European market. The 90,000-ton cargo was loaded at Dangote’s terminal in Lekki on April 25 and discharged in Rotterdam on May 13, according to data from trade analytics firm Kpler. This LSSR cargo is expected to be used as a blendstock to produce very-low sulphur fuel oil (VLSFO).
Approximately 72% of the fuel oil exported from Dangote has been delivered to the US since the refinery’s first LSSR export tender in mid-February. So far, just under 620,000 tons have been shipped. Another shipment of 83,400 tons departed the refinery on May 7 and is scheduled to arrive in France on May 22, though market participants believe this is not its final destination.
LSSR price assessments on a FOB Amsterdam-Rotterdam-Antwerp (ARA) basis have narrowed to a $5/barrel premium to front-month ICE Brent crude futures, down from an 18-month high of $7.50/barrel in mid-April. Maintenance work on fluid catalytic cracking (FCC) units, which began in the first quarter, has impacted the processing of LSSR and low-sulphur vacuum gasoil to increase gasoline yields.
Meanwhile, Dangote Refinery has placed a new order for about 24 million barrels of crude oil over the next year. The refinery is set to purchase millions of barrels of US crude as it ramps up its processing rates, highlighting Nigeria’s struggle to meet its OPEC quota for over a year. In April, Nigeria produced about 1.45 million barrels per day, well below its estimated capacity of 2.6 million barrels per day. Crude theft, aging pipelines, low investment, and divestments from oil majors have all contributed to this decline.
Dangote has issued a tender for the purchase of 2 million barrels per month of West Texas Intermediate (WTI) Midland crude for 12 months starting in July. The tender closes on May 21. This move underscores the refinery’s significant influence in global crude and fuel trading, as well as Nigeria’s ongoing challenges in boosting its own crude production. Elitsa Georgieva, executive director at Citac, an energy consultancy specializing in the African downstream sector, noted that WTI is a reliable and competitively priced option compared to Nigerian crude, which can be insufficient or unreliable.
The Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has released new draft rules to ensure sufficient local supply to the 650,000 barrels-per-day Dangote Refinery. These rules will require oil producers to sell crude to domestic refineries. Currently, the plant is operating at about half capacity and is leveraging cheaper US oil imports for a third of its feedstock. Since the beginning of the year, it has received at least one supertanker carrying about 2 million barrels of WTI Midland each month. An official at Dangote declined to comment.