Dangote To Purchase 400,000 Barrels Of Nigerian Crude Per Day

Dangote and the bottom of the barrel
Dangote Refinery

The Dangote Oil Refinery is expected to handle up to 400,000 barrels of crude per day (bpd) during the next two months and will operate at full capacity in the upcoming months.

The 650,000 metric tonnes capacity factory outside Lagos is scheduled to receive roughly 24 million barrels of petroleum in October and November, according to a cargo allocation list seen by Bloomberg. This indicates a trend towards using more domestic supply.

According to Bloomberg, FGE analyst Ronan Hodgson, who is based in London, the increased demand from Dangote may cause a major tightening of the West African crude market in the fourth quarter.

Hodgson pointed out that the refinery’s significant intake may cause Nigeria’s daily crude exports to go below one million barrels.

Bloomberg also noted that some of these shipments would see delays; two cargoes originally scheduled for September are included in October’s timetable. Even so, since Dangote progressively increased its operations, the amount planned for the upcoming months is noticeably greater than the refinery’s average intake of 255,000 barrels per day in the year’s first half (H1).

The vast refinery is expected to achieve full capacity within months, according to Vartika Shukla, chairman of Engineers India Limited, the project management company in charge of the plant. At the moment, it employs between 60 and 70 people.

According to dealers, the most recent allocations also imply a decrease in Dangote’s purchases of US crude.

The refinery had imported millions of barrels of West Texas Intermediate (WTI) Midland crude earlier in the year, but it later resold part of the oil and ended plans to buy more.

Nigerian National Petroleum (NNPC) Limited agreed last month to give the refinery access to crude in exchange for the sole right to distribute the petrol it produces.

Experts point out that if Dangote keeps raising its processing rates, Nigeria might be closer to its long-awaited objective of lowering costly imports of refined oil products.

“The need for petrol and diesel imports in West Africa will diminish rapidly as the refinery boosts production,” Hodgson stated.

NNPC Gives Up Its Monopoly

In the meantime, the NNPC is ending its exclusive purchasing agreement with Dangote Refinery, opening the door for other fuel distributors to buy petrol straight from the plant.

According to sources with knowledge of the situation who spoke with Premium Times, NNPC would no longer serve as the only off-taker in an effort to increase competition and strengthen supply chain stability.

Instead of using NNPC as a middleman, marketers can now discuss rates with Dangote Refinery directly based on the state of the market.

On Monday, an NNPC spokesman confirmed the development to Premium Times, stating, “Yes, that is correct. We can no longer continue to bear that burden.”

Recall that the NNPC was the sole company authorized to purchase petrol and resale it to marketers, who would distribute it to other parties when the Dangote Petroleum Refinery began producing petrol in September.

The NNPC declared that it would absorb an almost N133 per liter subsidy to purchase petrol from Dangote Refiner at N898.78 per liter and sell it to marketers at N765.99 per liter.

 

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