The Dangote Refinery, with a capacity of 650,000 barrels per day, is shifting its focus away from importing crude oil from the United States, as it expects to receive a greater supply from Nigeria, according to a report by Bloomberg.
The plant is expected to source just over 80% of its crude oil from local suppliers in the third quarter of 2024, an increase from less than 75% in the previous quarter, according to data from Bloomberg and information from traders.
This is coming on the heels of the recent approval by the federal government to sell crude oil to the refinery in Naira to reduce pressure on the foreign exchange earnings and ease the mode of transactions for both Dangote and the government.
Aliko Dangote, the CEO of the refinery, has repeatedly lamented that his petrochemical plants have been unable to source crude from NNPC and international oil companies operating in Nigeria.
Accordingly, the refinery has had to rely on feedstock from the United States and Brazil to meet its demands.
At some point, one-third of its feedstocks were imported from the U.S., with Dangote insisting that the IOCs are attempting to scuttle the success of the refinery.
Meanwhile, recent development shows that Dangote is now cutting back importation from the United States with 80% of its crude oil demands will be sourced locally.
The refinery received six shipments of crude oil from the NNPC for next month, according to a company spokesman. Most of these shipments contain about one million barrels each.
Additionally, two more shipments from Nigeria and two million barrels of WTI Midland crude are expected to arrive in September, according to tanker-tracking data.
Sales of Crude in Naira to Dangote to commence in October
Nairametrics had earlier reported that the federal government announced that sales of crude oil to the Dangote Refinery in naira will begin on October 1, 2024.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, made this known during a meeting with the Implementation Committee in Abuja.
This declaration followed the Federal Executive Council’s approval of President Tinubu’s proposal to stop NNPC from selling crude oil to local refineries in foreign currency.
The council decided that the 450,000 barrels designated for domestic use would be sold in Naira to Nigerian refineries, starting with Dangote Refinery as a pilot.
This measure aims to stabilize both the pump price of refined fuel and the dollar-naira exchange rate.
A current report indicates that Dangote Refinery requires 15 cargoes of crude oil annually.
The Nigerian National Petroleum Corporation (NNPC) will commit to supplying four of these cargoes.
What you should know
The Dangote refinery located in Lagos has repeatedly accused Nigeria’s oil regulatory bodies of refusing to enforce the Petroleum Industry Act (PIA) which mandates oil companies in Nigeria to provide crude to local refineries.
The refinery has lamented its frustration with receiving feedstocks from oil companies operating in Nigeria, particularly the Nigerian National Petroleum Corporation (NNPC) Limited, accusing the former of sabotage.
In response, the federal government decided to approve sales of crude oil to the mega plant in local currency to foster ease of transactions and encourage much-needed supply.
Also, the regulatory bodies said they are working to ensure that the IOCs supply the necessary crude to the refinery as it sets to begin production of petroleum products.