Dangote Refinery, a prominent oil facility in Lagos, is poised to acquire a minimum of 24 million barrels of US crude oil in the upcoming year to enhance its processing capabilities.
As reported by Bloomberg, the refinery, valued at $20 billion, has initiated a term tender for the procurement of 2 million barrels monthly of West Texas Intermediate Midland (WTI) crude for a year-long period starting in July. This strategic move equates to a total of 24 million barrels of crude oil over the course of a year.
The decision by Dangote Refinery to source US oil underscores Nigeria's ongoing challenges in boosting its domestic crude production, which has consistently fallen short of its potential capacity. The refinery's preference for US crude also reflects its strategy to access more cost-effective supplies compared to those available domestically.
Elitsa Georgieva, the Executive Director at Citac, a specialized energy consultancy focusing on the African downstream sector, emphasized the scarcity and unreliability of Nigerian crude supply, contrasting it with the availability, reliability and competitive pricing of WTI.
Georgieva noted that diversifying feedstock sources offers Dangote Refinery flexibility and economic advantages, making the tender a logical choice for the refinery.
Nigeria has faced challenges in meeting its production targets set by the Organization of Petroleum Exporting Countries (OPEC) for over a year.
The country's crude and liquids output in April stood at approximately 1.45 million barrels per day, significantly below its estimated production capacity of 2.6 million barrels per day. Factors such as crude theft, aging pipelines, limited investments, and divestments by major oil companies have contributed to the decline in production levels.
To address the need for sufficient local supply to support the operations of the 650,000 barrel-a-day Dangote Refinery, Nigeria's upstream regulator, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), recently introduced new regulations.
