ASHENEWS reports that the Organisation of Petroleum Exporting Countries (OPEC) has indicated that the world’s largest single-train refinery, Nigeria-based Dangote Refinery and Petrochemicals, will significantly disrupt the performance of Europe’s oil industry, particularly in Northwest Europe (NWE) Gasoil markets.
The refinery’s supplies of diesel and jet fuel are expected to exert substantial pressure on the European oil and gas sector, a development that industry experts predict will have a positive ripple effect on Nigeria’s economy.
In its newly released Monthly Oil Market Report for June 2024, OPEC identified the Dangote Refinery as one of the key players poised to challenge traditional suppliers in Europe. The report underscores how the refinery’s increasing output, coupled with robust flows from the Middle East and new supplies from Mexico’s Olmeca refinery, could reshape the dynamics of the European oil market in the mid-term.
ALSO READ FG committed to supporting Dangote Refinery — Oil minister
Earlier reports from Standard & Poor’s Global had also forecasted that Nigeria’s $20 billion Dangote refinery would significantly alter global crude flows as it reaches full operational capacity. Since its launch in January, the refinery has already begun to influence international markets, as confirmed by trading sources and ship tracking data.
OPEC’s report highlighted that the Dangote refinery, with its 650,000 barrels per day (bpd) capacity, is targeting the broader European market, especially after international oil companies halted crude oil supplies to the facility. Vice President of Oil and Gas at Dangote Industries Limited, Devakumar Edwin, recently announced that the refinery had successfully exported its first jet fuel cargo to Europe, marking a significant milestone as the refinery scales up production.
The refinery, owned by Africa’s richest man, Aliko Dangote, has already exported 90% of its 3.5 billion liters of jet fuel and diesel to Europe due to what Edwin described as a lack of adequate support from the Nigerian government. “From the start of production, more than 3.5 billion liters, which represents 90% of our production, have been exported,” Edwin noted.
British Petroleum (BP) has begun transporting its first jet fuel cargo from Dangote Refinery to Rotterdam, following a successful bid for part of a 120,000 metric tonnes tender offered at the end of May, according to S&P Global.
OPEC also reported that in June, the jet/kerosene crack spread in Rotterdam against Brent crude showed a slight decline, influenced by the refinery’s supply-side dynamics. Despite signs of recovering air travel, subdued demand for jet fuel in the aviation sector weighed on the product market. However, future European jet/kerosene demand is expected to increase as aviation consumption picks up in the coming months.
Within the first six months of its operations, Dangote Refinery scaled up to 400,000 bpd, delivering diesel, jet fuel, naphtha, and fuel oil to both domestic and export markets. Production of gasoline, Nigeria’s primary fuel type, is expected to commence by mid-August. This development has already impacted global crude flows, with a noticeable reduction in the export of Nigerian cargoes and an increased import of US WTI Midland crude, a comparable light, sweet grade.
The refinery’s operations could lead to a tightening of the light, sweet crude market. “Its diet is WTI and the lighter Nigerian [crudes], so if you were chasing those barrels, you’d probably feel it quite keenly,” a West African crude trader told Commodity Insights. The refinery has signed long-term supply contracts for WTI Midland crude due to its competitive pricing, which was last assessed by Platts at $82.36/b on July 31, compared to Nigeria’s Bonny Light at $82.80/b.
The impact of Dangote refinery’s crude flows has been felt in other markets, especially in Europe, which is the largest consumer of light, sweet Nigerian crude. So far, the US grade has accounted for 30% of the crude delivered to Dangote Refinery through 18 cargoes.
Aliko Dangote, President of Dangote Group, stated that the facility would broaden its feedstock sources by incorporating crude from Libya, Angola, and Brazil. “The refinery was built to use Nigerian crude and add value to it within Nigeria. Why should we deviate from that focus?” Dangote said, adding that while crude supply issues are being resolved, the refinery remains open to all opportunities to supplement its operations.
Rasool Barouni, Associate Director and Head of Refining at S&P Global Commodity Insights, emphasized that the refinery is designed to process a range of light and medium grades of crude oil, including Nigerian grades. “Other similar grades, including other West African grades, could be an option,” Barouni added.
Nigeria, as Sub-Saharan Africa’s largest oil producer, pumped 1.5 million bpd in June, according to the Platts OPEC Survey from S&P Global Commodity Insights. Until recently, all of Nigeria’s oil was exported due to a lack of refining capacity, necessitating the importation of gasoline, diesel, and jet fuel for domestic use. The emergence of the Dangote Refinery marks a turning point, not only for Nigeria’s energy sector but also for its economy, as the country transitions from an importer to a major exporter of refined petroleum products.
