Dangote Refinery has announced plans to purchase at least 24 million barrels of US crude over the next year as it enhances its processing capabilities.
According to a Bloomberg report, the $20 billion refinery has issued a term tender to buy 2 million barrels per month of West Texas Intermediate (WTI) Midland crude for 12 months starting in July, totaling 24 million barrels over the year.
This move to source US oil underscores Nigeria’s ongoing challenges in boosting its own crude production, which remains well below its potential capacity. It also reflects Dangote’s strategy to access more affordable supplies than those available domestically. Additionally, it highlights the refinery’s significant role in global crude and fuel trading.
Elitsa Georgieva, Executive Director at Citac, an energy consultancy specializing in the African downstream sector, said: “Supply of Nigerian crude is insufficient or unavailable and sometimes unreliable. WTI on the other hand, is available, with reliable supply and competitively priced
“Buying different feed stocks also provides flexibility and optionality for the refinery, so the tender makes economic sense for Dangote,”
For over a year, Nigeria has failed to meet its quota set by the Organization of Petroleum Exporting Countries (OPEC) +. The country’s crude and liquids production in April stood at approximately 1.45 million barrels per day, significantly lower than its estimated production capacity of 2.6 million barrels per day.
Various factors, including crude theft, aging oil pipelines, insufficient investment, and divestments by major oil companies operating in the country, have contributed to this decline in production.
To ensure an adequate local supply for its 650,000 barrel-per-day refinery, Nigeria’s upstream regulator, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), recently introduced new draft regulations. These regulations will require oil producers in Nigeria to sell crude to domestic refineries if they cannot procure it locally. NUPRC has mandated all oil companies operating in Nigeria to provide crude to domestic refineries before they can export it.
This policy ensures that producers fulfill their domestic supply obligations before exporting crude.
Under the new regulations, NUPRC will serve as an intermediary between local refiners and producers in cases where agreements on crude supply cannot be reached. It will facilitate a sales purchase agreement using a willing-buyer, willing-seller model.
This updated policy could potentially benefit Dangote refinery by allowing it to source crude oil from local suppliers rather than relying solely on imports. Currently operating at approximately half capacity, the refinery has been leveraging cheaper US oil imports for up to one-third of its feedstock. Since the beginning of the year, it has received at least one supertanker carrying around 2 million barrels of WTI Midland each month.
An official at Dangote declined to provide a comment on the report, as stated by Bloomberg.