Ramping Up Production Amid Insufficient Supply
The Dangote Petroleum Refinery, Africa’s largest refinery, is preparing to import additional crude oil as the Nigerian National Petroleum Company Limited (NNPC) struggles to meet the refinery’s daily feedstock requirements. Currently operating at 500,000 barrels per day (bpd), the Lekki-based facility is targeting its full capacity of 650,000 bpd by June 2025.
While the NNPC allocates 450,000 bpd of crude for domestic refineries, officials have noted that supplying the Dangote refinery with the required 550,000 bpd blend of Nigerian crude oil remains challenging.
Expanding Crude Storage Capacity
To accommodate the anticipated crude imports, the refinery is constructing eight additional tanks, increasing its storage capacity by 41.67% to hold 3.4 billion litres. Devakumar Edwin, Vice President of Oil and Gas Business at Dangote Industries, stated, “Importing crude from other countries instead of relying solely on local supplies means our crude stockpiles will need to be higher. Four of these tanks are nearing completion.”
Naira-for-Crude Arrangement Under Review
Under President Bola Tinubu’s naira-for-crude initiative, the NNPC is expected to supply about 385,000 bpd of crude oil to the Dangote refinery, to be paid for in naira at a fixed exchange rate. However, it remains unclear if this target has been consistently met.
The initiative, launched in July 2024, aims to stabilize Nigeria’s refining capacity and reduce foreign exchange pressures. It initially focused on the Dangote refinery, with other refineries, including the Port Harcourt, Warri, and Kaduna refineries, slated to join the program as they come online.
National Refining Capacity and Rising Demand
With the revival of the Port Harcourt and Warri refineries, alongside smaller facilities such as Waltersmith and Edo refineries, Nigeria’s refining capacity is projected to reach 974,500 bpd in 2025. However, the demand for crude oil among local refineries has outpaced the allocated supply, prompting the need for imports.
Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) indicates that between January and June 2025, eight functional refineries will require 123.5 million barrels of crude oil to meet production demands.
Global Implications of Dangote Refinery’s Output
The $20 billion Dangote refinery, one of the largest globally, is set to impact international markets. Its production of Euro 5 standard petrol has already affected Europe’s refined petroleum market. A consultant to the refinery remarked, “This refinery is in a league of its own. Few facilities worldwide match its capacity and sophistication.”
Challenges and Future Outlook
Despite its potential, the refinery faces hurdles, including:
- Insufficient Local Supply: The NNPC’s inability to meet the refinery’s full crude demand forces reliance on imports.
- Logistical Adjustments: Importing crude requires expanded storage and increased operational costs.
- Policy Uncertainties: The naira-for-crude initiative, still in its pilot phase, will be reviewed in April 2025 to assess its effectiveness.
Experts argue that as Nigeria scales up crude production, local refineries will need both local and imported feedstock to sustain operations. The NUPRC’s Chief Executive, Gbenga Komolafe, stated, “The success of Nigeria’s refining sector hinges on ensuring sufficient crude supply while balancing domestic and export demands.”
Conclusion
The Dangote refinery’s move to import crude highlights the challenges of meeting Nigeria’s burgeoning refining needs solely with local resources. As the refinery ramps up to full capacity, its operations will play a crucial role in Nigeria’s energy landscape, with significant implications for the global petroleum market. Meanwhile, ensuring a steady and adequate supply of crude oil—whether locally or through imports—will be essential to sustaining the refinery’s output and achieving Nigeria’s energy goals.
