Giant Dangote Refinery purchase 24 million barrels

US oil giant Dangote Refinery to purchase 24 million barrels

In order to increase its processing capacity, Dangote Refinery plans to purchase at least 24 million barrels of US oil over the course of the upcoming year.

The $20 billion refinery has put out a term tender for the acquisition of 2 million barrels of West Texas Intermediate Midland (WTI) crude every month for a period of 12 months beginning in July, or 24 million

barrels of crude in a year, according to a report by Bloomberg.

The need for US oil is a reflection of Dangote’s readiness to access less expensive supplies than it can find domestically and Nigeria’s difficulty in increasing its own crude production, which is still much below

theoretical capability. It also emphasizes the refinery’s significant impact on the world’s fuel and oil commerce.

The executive director of Citac, an energy consulting firm that focuses on the downstream industry in Africa, Elitsa Georgieva, stated: “The supply of Nigerian crude is insufficient or unavailable and can be

inconsistent.” Conversely, WTI is affordable, readily available, and has a consistent supply.

The tender makes financial sense for Dangote since “purchasing different feed stocks also provides flexibility and optionality for the refinery.”

For the past year at least, Nigeria has been unable to fulfill its Organization of Petroleum Exporting Countries (OPEC) plus quota. In April, the country produced roughly 1.45 million barrels of crude and

liquids per day, which is still significantly less than its estimated 2.6 million barrels per day production capability.

Production is falling as a result of crude theft, deteriorating oil pipelines, poor investment, and divestitures from national oil companies.

Nigeria’s upstream regulator, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), announced new draft guidelines last month that will force its oil producers to sell crude to domestic

refineries in order to guarantee a sufficient local supply to the refinery, which processes 650,000 barrels of oil per day. All Nigerian oil companies are required by NUPRC to provide crude to domestic refineries that

are unable to obtain it locally.

Only when producers fulfill these domestic supply commitments are they permitted to export crude.

When agreements on the supply of crude oil cannot be made, the new regulations provide that NUPRC will serve as a middleman between local refiners and producers, enabling a sales purchase agreement

through a willing-buyer, willing-seller method.

The Dangote Refinery may profit from this new policy since it will be able to buy crude oil from domestic vendors instead of relying on imports. Up to a third of the plant’s feedstock comes from cheaper US oil

imports, which it is now using at approximately half capacity. It has received at least one supertanker a month since the beginning of this year, transporting roughly 2 million barrels of WTI Midland.