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Dangote refinery faces crude oil supply challenges, turns to imports

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Dangote petroleum refinery

The Dangote Petroleum Refinery, one of the largest and most ambitious oil refinery projects in Africa, is confronting a critical supply issue.

Due to challenges with local crude oil availability, the refinery is now set to receive up to 12 million barrels of crude oil imported from the United States.

This move comes as the refinery, which is in the final stages of ramping up its operations, struggles to meet its production targets.

Despite the $20 billion investment, the Dangote refinery’s push to reach its full capacity of 650,000 barrels per day by June this year is being hindered by insufficient local supply from the Nigerian National Petroleum Company Limited (NNPC).

The Dangote refinery, located in Lekki, Lagos, has already received significant shipments of crude oil from various sources, including the US.

A report by The Diaspora digital media (DDM) confirmed that approximately 12 million barrels of crude oil have already been dispatched from the United States and are expected to arrive in Nigeria by February.

This marks a significant step for the refinery, which has been forced to seek alternative sources for crude oil due to the inability of the NNPC to meet its crude supply commitments.

As of now, the Dangote refinery has managed to increase its production capacity to approximately 500,000 barrels per day, a milestone for the facility.

However, its goal is to ramp up production to 650,000 barrels per day by mid-2025, a target that currently seems challenging given the limitations in local crude supply.

The facility requires a steady and reliable supply of crude oil to maintain and expand its production, and local supply from the NNPC has not been able to meet these needs.

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The NNPC has been struggling to meet domestic supply needs, with reports suggesting that it is unable to supply the Dangote refinery with its required 350,000 barrels per day, which is part of the 450,000 barrels per day meant for Nigeria’s local consumption.

With the Dangote refinery’s current production capacity at 500,000 barrels per day, it is becoming increasingly evident that the facility will need to look beyond Nigeria’s shores for feedstock in order to meet its production targets.

In response to these challenges, Dangote officials have confirmed that the refinery will continue to import crude oil as necessary to ensure it meets its production goals.

An insider source at the facility shared that the refinery’s leadership is actively managing the situation and that sourcing crude from global markets has become a necessary part of the refinery’s operations.

“Currently, we are at 500,000 barrels per day; we will ramp to 650,000 by midyear. You know what it means? So, it is a normal process to source crude oil anywhere it is available,” said an official at the Dangote refinery.

In a bid to mitigate these supply issues, Dangote refinery is also exploring additional storage capacity.

The facility is constructing eight new tanks, which will increase its crude oil storage capacity by 41.67 percent, bringing the total storage capacity to 3.4 billion liters.

This increase in storage capacity is necessary to accommodate the growing imports of crude oil, as local supplies from the NNPC are no longer sufficient to meet the refinery’s daily requirements.

Vice President of Dangote Industries’ oil and gas business, Devakumar Edwin, explained that this expansion of storage is a response to the refinery’s growing reliance on imported crude oil.

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He added, “Importing crude from other countries instead of buying locally means that our crude stockpiles will have to be higher.”

This reliance on imported crude comes at a time when the Nigerian government, under President Bola Tinubu, has pushed for a naira-for-crude deal, under which local refineries are encouraged to purchase crude oil using the Nigerian currency rather than dollars.

In an effort to support this initiative, the NNPC began selling crude oil to the Dangote refinery in naira starting in October.

However, due to ongoing supply challenges, the Dangote refinery has had to seek additional sources of crude to meet its refining capacity.

The Nigerian government’s emphasis on a naira-for-crude arrangement, which aims to reduce the country’s reliance on foreign currency for oil transactions, has led to some initial successes but also highlighted the difficulty of meeting domestic crude oil demands.

According to reports, the Dangote refinery is currently building stockpiles of crude oil as it faces challenges in securing a consistent local supply.

This is expected to become a more pressing issue as the refinery seeks to meet its target of refining 650,000 barrels per day by mid-2025.

In addition to the crude oil sourced from the United States, Dangote refinery has also issued tenders for the purchase of other types of crude.

In May 2024, the refinery issued a term tender for the purchase of two million barrels of West Texas Intermediate Midland crude each month for a year-long contract.

This amounts to 24 million barrels of crude oil annually.

With the growing pressure to meet its refining targets, Dangote’s strategy includes diversifying its crude oil sources to ensure a steady supply of feedstock for its operations.

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The Dangote refinery, which produces petrol, diesel, and aviation fuel, plays a crucial role not only in Nigeria but also in supplying fuel to other countries.

The refinery’s capacity to meet domestic fuel demand is seen as a vital step in reducing the country’s dependence on fuel imports and addressing the chronic fuel shortages that have plagued Nigeria for years.

However, the challenges it faces with local crude supply underscore the complexities of the Nigerian oil sector, where infrastructure, production capacities, and logistics are often at odds with the demand for refined products.

As the Dangote refinery approaches its June deadline to reach full capacity, the ongoing crude supply challenges are likely to remain a key focus for the company.

While the refinery has already taken steps to secure alternative crude supplies, including international shipments and additional storage capacity, it will need continued support from both the Nigerian government and international partners to achieve its long-term goals.

In conclusion, the Dangote refinery’s journey to full production is being significantly impacted by local crude supply shortages.

While the refinery is adapting by seeking crude oil imports and increasing storage capacity, the challenges of sourcing enough feedstock remain a critical hurdle in achieving its ambitious production targets.

If these supply issues are not addressed, it may take longer than anticipated for the Dangote refinery to fully realize its potential as a major player in Nigeria’s oil and gas sector.


For Diaspora Digital Media Updates click on Whatsapp, or Telegram. For eyewitness accounts/ reports/ articles, write to: citizenreports@diasporadigitalmedia.com. Follow us on X (Fomerly Twitter) or Facebook

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