By Adedapo Adesanya
Dangote Refinery has revealed plans to buy at least 24 million barrels of US crude oil over the next year as it ramps up its processing capabilities.
A report by Bloomberg revealed that the refinery has issued a term tender for the purchase of 2 million barrels a month of West Texas Intermediate Midland (WTI) crude for 12 months starting in July, which amounts to 24 million barrels of crude in one year.
The push for US oil comes as Nigeria’s struggle to lift its crude production, which remains well below the country’s target of 1.8 million barrels per day.
Analysts cited in the report said it showed Dangote’s willingness to tap cheaper supplies than it can find at home. It also highlights how influential the refinery will be in global crude and fuel trading.
Ms Elitsa Georgieva, Executive Director at Citac, an energy consultancy specializing in the African downstream sector, said: “Supply of Nigerian crude is insufficient or unavailable and sometimes unreliable. WTI on the other hand, is available, with reliable supply and competitively priced.
“Buying different feed stocks also provides flexibility and optionality for the refinery, so the tender makes economic sense for Dangote,”
Nigeria has not been able to meet its Organisation of Petroleum Exporting Countries (OPEC) + quota for at least a year. The nation pumped about 1.45 million barrels a day of crude and liquids in April, still far below its estimated production capacity of 2.6 million barrels a day.
Oil accounts for 60 per cent of foreign exchange earnings but the quadruple of challenges such as crude theft, aging oil pipelines, low investment, and divestments from oil majors operating in the country have all contributed to declining production.
Recently, the Nigeria’s upstream regulator, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) said it will increase local supply to the 650,000 barrel-a-day refinery.
The regulator released new draft rules last month that will compel its oil producers to sell crude to domestic refineries.
NUPRC also mandated all oil companies in Nigeria to supply crude to domestic refineries that are unable to procure it locally meaning producers are allowed to export crude only after meeting these domestic supply obligations.
Under the new rules, NUPRC will act as an intermediary between local refiners and producers when agreements on crude supply are not reached, facilitating a sales purchase agreement using a willing-buyer, willing-seller model.
This new policy could benefit Dangote refinery by enabling it to procure crude oil from local suppliers rather than depending on imports.
The $19.5 billion plant, currently running at about half capacity, is taking advantage of cheaper US oil imports for as much as a third of its feedstock.
Since the start of this year, it has received at least one supertanker carrying about 2 million barrels of WTI Midland each month.