Dangote Refinery to Receive Crude Oil from NNPCL in December

A landmark deal for Africa’s energy sector

by Motoni Olodun

The Dangote Refinery, Africa’s largest oil refinery with a capacity of 650,000 barrels per day, is set to receive crude oil from the Nigerian National Petroleum Company Limited (NNPCL) in December 2023, according to a Reuters report.

The report, citing industry sources from both NNPCL and Dangote Refinery, said that NNPCL plans to supply up to six shipments of crude oil in December for testing purposes as part of a one-year agreement. The volumes for the following months will be determined by mutual consent and availability.

The sources said the shipments will total 200,000 barrels daily, or about 4-5 cargoes. A Dangote Group official, who spoke anonymously, declined to comment on the agreement’s details, citing confidentiality clauses.

The Dangote Refinery, located in the Lekki Free Zone near Lagos, Nigeria’s commercial capital, is expected to start refining operations in early 2024 after missing several deadlines due to delays in crude oil deliveries and other technical issues.

The refinery, owned by Africa’s richest man, Aliko Dangote, is designed to process a variety of light and medium grades of crude oil and produce high-quality refined products such as gasoline, diesel, jet fuel, and polypropylene for the domestic and regional markets.

The refinery is also expected to reduce Nigeria’s dependence on imported refined products, which cost the country billions of dollars in subsidies and foreign exchange every year. Nigeria, Africa’s largest oil producer, has four refineries with a combined capacity of 445,000 barrels per day, but they operate well below their potential due to poor maintenance and corruption.

The NNPCL, the state-owned oil company, has a 20% stake in the Dangote Refinery, following a government directive that requires the corporation’s involvement in any privately owned refinery with a capacity of more than 50,000 barrels per day.

The NNPCL Group Chief Executive Officer, Mele Kyari, had said that the company’s equity participation aims to enhance the national energy security and fiscal security of the country. He also said the corporation will support the refinery with crude oil feedstock and other necessary inputs to ensure its success.

The Dangote Refinery, estimated to cost $19 billion, is one of the largest industrial projects in Africa and has been hailed as a game-changer for the continent’s energy sector. The International Energy Agency (IEA) has said that the refinery will enable oil demand growth in the next decade, especially for African countries that heavily rely on imported refined products.

The refinery is also expected to create thousands of direct and indirect jobs, boost the local economy, and spur the development of other industries in the Lekki Free Zone and beyond.

Source: Bloomberg

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