Crude Shortage May Delay Dangote’s July Petrol Supply Launch

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The Dangote Oil Refinery, a highly anticipated project poised to transform Nigeria's petrol supply market, faces potential delays due to a shortage of crude oil. Set to begin operations in July 2024, the refinery’s ambitious goal of refining 650,000 barrels per day (bpd) now seems uncertain.

Sources within the oil industry have revealed that the refinery has yet to secure the necessary crude volumes to commence refining operations. A source from the oil trading sector mentioned via phone, “The refinery is yet to receive the required volumes of crude oil needed to refine PMS for the July takeoff.”


Jide Pratt, the country manager of Trade Grid, underscored the significance of this issue. He indicated that the refinery might miss its July target, suggesting a more realistic timeframe would be August or September, with December being a worst-case scenario. He added that the challenges in selling premium motor spirit (PMS) in USD and the continued existence of fuel subsidies further complicate the situation.

The Nigerian National Petroleum Company (NNPC) Ltd, which holds a 20% equity stake in the Dangote Refinery, has been expected to be the primary crude supplier. However, it appears the NNPC has committed its crude supplies to other entities, potentially through a $3 billion oil-for-loan deal with the African Export-Import Bank. This agreement involves future oil production being pledged for loan repayments, limiting the availability of crude for the Dangote Refinery.


Kalu Aja, a financial planning expert, questioned the rationale behind the crude shortage, given Nigeria's status as Africa’s largest oil exporter. He urged the NNPC to support the refinery by allocating its oil equity to Dangote.


Hector Igbikiowubo, publisher of Sweet Crude Reports, emphasized the importance of operational refineries for Nigeria's energy security. On a Channels TV program, he queried why the NNPC isn’t allocating its 445,000 bpd capacity to the Dangote Refinery for refining purposes.


Efforts to reach Femi Soneye, NNPC Ltd’s chief communication officer, for comments were unsuccessful.

In response to the crude supply challenges, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has indicated its intent to mandate international oil companies (IOCs) to supply crude to the Dangote Refinery. Olaide Shonola, NUPRC’s spokesman, assured that the commission is actively engaging with stakeholders to ensure local crude sales to Dangote and other refineries.


While the refinery has only received limited deliveries of Nigerian and US crude grades, there is speculation that Dangote might seek alternative term contracts with other supply sources to meet its refining needs.

The crude shortage threatens the timely takeoff of Dangote’s petrol supply in July, highlighting broader issues within Nigeria's oil supply chain. The situation underscores the need for strategic planning and cooperation among stakeholders to realize the refinery’s potential in reducing Nigeria’s reliance on imported petrol and enhancing energy security.


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