The Dangote Refinery, a $20 billion investment, is planning to purchase at least 24 million barrels of U.S. crude oil over the next year as it scales up its processing capabilities.
According to a Bloomberg report, the refinery has issued a term tender for acquiring 2 million barrels per month of West Texas Intermediate Midland (WTI) crude starting in July, totaling 24 million barrels over a year.
This move underscores Nigeria’s ongoing challenges in boosting its own crude production, which remains significantly below its theoretical capacity.
It also reflects Dangote Refinery’s strategy to secure more affordable and reliable crude supplies from the U.S., given the insufficiencies and unreliability of local Nigerian crude supplies.
Elitsa Georgieva, Executive Director at Citac, an energy consultancy, explained that Nigerian crude is often unavailable or unreliable, while WTI offers a steady and competitively priced supply.
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She added that purchasing diverse feedstocks provides the refinery with flexibility and economic advantages.
Nigeria’s crude production has not met its Organization of Petroleum Exporting Countries (OPEC) + quota for over a year. In April, Nigeria produced about 1.45 million barrels of crude and liquids per day, well below its estimated capacity of 2.6 million barrels per day.
Factors contributing to the declining production include crude theft, aging pipelines, low investment, and divestments by major oil companies.
To address the issue of local supply, Nigeria’s upstream regulator, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), released new draft rules last month.
These rules require oil producers to prioritize supplying crude to domestic refineries before exporting any surplus.
If agreements on crude supply are not reached, the NUPRC will facilitate a sales purchase agreement using a willing-buyer, willing-seller model.
This policy could benefit Dangote Refinery by ensuring a more reliable local crude supply.
Despite currently operating at about half capacity, the refinery has been importing cheaper U.S. oil, with at least one supertanker carrying approximately 2 million barrels of WTI Midland arriving each month since the start of the year.
An official from Dangote declined to comment on the Bloomberg report.
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