According to Bloomberg, the Federal Government plans to send up to 400,000 barrels of Nigerian crude oil per day to the Dangote refinery under the naira-for-crude agreement.
It stated that this big development is projected to occur within the next two months, resulting in 24 million barrels of Nigerian supplies between October and November 2024.
This increase in processing capacity might have a significant impact on both refinery operations and the local oil sector, changing the region’s import and export markets.
This new development follows the Federal Government’s statement that the naira-for-crude deal had begun.
On Monday, the Nigerian National Petroleum Company Limited said that it will begin supplying crude oil in naira to the Dangote Petroleum Refinery this week, with three more refineries expected to start producing Premium Motor Spirit.
According to cargo allocations obtained by Bloomberg News, Dangote’s increasing reliance on domestic feedstock may destabilize the Atlantic oil market by significantly reducing Nigerian crude exports.
The 650,000-barrel-per-day plant, the largest in Africa or Europe, will receive 13 to 14 shipments from Nigeria’s usual monthly program of 50 cargoes.
The West African crude market is set to be “substantially tighter” in the fourth quarter because of the supply to Dangote, said Ronan Hodgson, a London-based analyst at FGE.
The volumes could even send Nigerian exports below 1 million barrels a day, he said. Some shipments over the next two months may not be delivered as planned, and October’s list includes two cargoes already delayed from September.
Still, the scheduled volume is significantly larger than the average 255,000 barrels a day of Nigerian oil taken in by Dangote over the first half of the year as it gradually ramped up processing, data compiled by Bloomberg show.
Dangote is already running at 60-70 per cent capacity and will reach its full rate within months, project management firm Engineers India Ltd. Chairman Vartika Shukla said last month.
The latest allocations also suggest that Dangote has continued to curtail its buying of US crude, according to traders.
Earlier this year, the refinery imported millions of barrels of WTI Midland, before re-selling some of the oil and scrapping plans to buy more.
Nigerian National Petroleum Co. reached an agreement with Dangote last month under which the country’s state-owned energy firm will supply crude in return for being the sole distributor of the refinery’s crucial gasoline production.
If Dangote’s ramp-up continues to advance in the coming months, Nigeria could start to realize its long-held goal of curbing costly oil product imports.
“If the refinery runs at higher rates, the West African market for gasoline and diesel imports will shrink extremely quickly,” FGE’s Hodgson said.
