Crude Shortage May Hinder Dangote Refinery’s July Start

Dangote Oil Refinery’s plan to start petrol production and supply by July might be delayed because there isn’t enough crude oil available, say industry insiders.

The refinery, which can handle 650,000 barrels of oil per day, was expected to help Nigeria rely less on imported petrol.

Supply Challenges

However, there are worries that there might not be enough crude oil available, which could stop Dangote from meeting its goal to start refining petrol in July. 

According to stakeholders cited by Businessday, the crude oil shortage issue will undermine Dangote refinery’s production and the facility may not be ready to supply petrol until later this year.

“The issue of crude supply is still a major issue, and postulations on how the premium motor spirit (PMS) will be sold in USD are unattended to,” says Jide Pratt, country manager of Trade Grid, who works with many independent dealers across Africa.

He added: 

“A safe assumption may be August or September at best and December at worst.

It’s clear that subsidy still exists and the possibility of selling to NNPC is reduced, as it currently has trade account receivables with traders in excess of 160 days. The Dangote Refinery is a commercial entity and will unlikely toe this line of credit sales with its running cost and interest payments,”

In the same vein, publisher of Sweet Crude Reports, Hector Igbikiowubo, also stressed the importance of NNPC working to ensure Nigeria has enough energy. 

“The question now is, how come the NNPC isn’t allotting all of its 445,000 barrels per day to the Dangote Refinery for refining?,” he questioned during a conversation on Channels TV.

Despite NNPC owning 20% of the refinery, it might not be able to supply most of Dangote’s needed crude. Last year, Edwin Devakumar, vice president of Dangote Industries Limited said NNPC had already promised its crude to other parties. 

Currently, Dangote Refinery has only received crude from Nigeria and the US but might look for more suppliers as it increases production like some Indian refiners do with Middle Eastern crude.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said it would make international oil companies (IOCs) give crude to Dangote and other local refineries. 

Olaide Shonola, a spokesperson for NUPRC, said they would keep pushing these companies to make sure they supply crude oil locally. 

She said: 

“We’ve been intervening and intervening. I am sure you’re aware of a recent meeting that was held with them on domestic crude oil supply. We will keep engaging them, NUPRC has been doing that.

“I can’t say we will force them. But as the regulator, we can mandate. And that’s what we are doing, giving clear directives that this must be done.

We will just keep on engaging and you will agree with me that most of these things have to be planned. We will keep on engaging. We will do our regulatory function in that area.”