The Dangote Refinery, a significant infrastructural project in Nigeria with a capacity of 650,000 barrels per day, has faced delays in commencing its operations due to a shortage of crude oil supply.
This setback in Nigeria’s drive towards self-sufficiency in refined petroleum products has resulted in continued reliance on fuel imports.
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The Dangote Refinery’s failure to meet its October production target marks the second time in 2023 that hopes for ending petrol importation have been deferred.
Additionally, other modular refineries in the country face similar challenges, as they cannot produce refined petroleum products without an adequate supply of crude oil.
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Despite the Dangote Refinery’s anticipation of receiving its first cargo of crude oil in late September, the facility has been unable to commence production due to difficulties in securing the necessary crude volumes.
The Nigerian National Petroleum Company Limited (NNPCL) had already committed its crude to other entities, leading the Dangote Group to temporarily import crude oil.
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Devakumar Edwin, Executive Director of the Dangote Group, confirmed this situation in September, stating that the firm would receive supplies from NNPCL starting in November.
The refinery was expected to produce up to 370,000 barrels per day of crude, yielding Automotive Gas Oil (diesel) and jet fuel by October 2023. Petrol production was projected for November 30, 2023.
However, despite the promises and projections, no evidence of diesel production from the Dangote Refinery was observed in October. The facility had initially aimed to start refining in August, according to Aliko Dangote, the President of Dangote Group.
Sources within the Nigerian Upstream Petroleum Regulatory Commission and the Federal Ministry of Petroleum Resources confirmed the crude oil supply challenges experienced by the Dangote Refinery.
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While the Federal Government cited Nigeria’s low oil output as a reason for the delay, operators of domestic refineries expressed concerns about the lack of feedstock (crude oil) for their refineries, impeding the launch of these facilities.
Local refineries, including modular ones, confirmed their readiness to begin production, with about five of them prepared to commence operations. However, the scarcity of crude oil supply persisted, leading International Oil Companies (IOCs) to prioritize exporting crude to earn dollars, to the detriment of domestic refiners.
The Nigerian Upstream Petroleum Regulatory Commission announced its commitment to ensuring a consistent supply of crude to indigenous refiners, with plans to enforce domestic crude oil supply obligations.
Oil marketers emphasized the need for the government to support modular refineries with crude oil to boost local production of refined products. This support, they argued, would help reduce the pump price of these products when produced in large volumes domestically.
Despite the impending production capacity of the Dangote Refinery and the existence of modular refineries, stakeholders view these facilities as vital in meeting Nigeria’s energy needs and providing world-grade quality refined petroleum products to the local market.
Fuel importation has continued despite Nigeria’s goal of self-sufficiency, with over 5.52 billion litres of Premium Motor Spirit (petrol) imported since the removal of the PMS subsidy on May 30, 2023. The demand for petrol dropped by 30% following the subsidy removal, but the country still relies on imports due to ongoing foreign exchange challenges.
