Nigeria’s Dangote refinery, the largest in Africa, has made history by importing crude oil from the United States for the first time.
The refinery, which has a capacity of 650,000 barrels per day, bought 2 million barrels of WTI Midland from Trafigura Group, a leading commodity trading company, for end-February delivery, according to Bloomberg.
This is a significant development for the refinery, which is expected to help Nigeria reduce its reliance on imported fuel and become a net exporter of refined products.
US crude oil is generally lighter and sweeter than Nigerian crude oil, which makes it easier to refine. Additionally, the US is a major producer of shale oil, a type of crude oil that is extracted from rock formations using horizontal drilling and hydraulic fracturing. Shale oil production has boomed in recent years, and it has made the US a major exporter of crude oil.
The Dangote refinery, which is owned by Africa’s richest man, Aliko Dangote, is currently in the process of ramping up production, and it is expected to reach full capacity by the end of 2024. The refinery is part of a $15 billion complex that also includes a petrochemical plant, a fertilizer plant, and a gas pipeline.
The refinery is seen as a game-changer for Nigeria, Africa’s largest oil producer, which currently imports most of its refined products due to the poor state of its existing refineries. The country spends billions of dollars every year on fuel subsidies to keep prices low for consumers, but this has also created a huge burden on the public finances and encouraged smuggling.
The Dangote refinery is expected to meet Nigeria’s domestic demand for refined products, such as gasoline, diesel, kerosene, and jet fuel, and also export surplus to regional and international markets. This will not only save the country foreign exchange, but also create jobs, boost industrialization, and stimulate economic growth.
The refinery’s decision to import US crude oil also reflects the changing dynamics of the global oil market, as the US has emerged as a major supplier of crude oil to Africa in recent years, displacing traditional sources such as Saudi Arabia and Angola.
According to the US Energy Information Administration, US crude oil exports to Africa reached a record high of 41.3 million barrels in 2021, up from 15.6 million barrels in 2019. Nigeria was the second-largest destination for US crude oil in Africa, after South Africa, with 7.4 million barrels in 2021.
The US crude oil exports to Africa are driven by several factors, such as the availability of shale oil, the lifting of the US crude oil export ban in 2015, the lower shipping costs compared to other regions, and the compatibility of US crude oil with African refineries.
The Dangote refinery’s purchase of US crude oil is likely to further strengthen the trade ties between the two countries, and also enhance the energy security and diversity of both nations.
The Dangote refinery is one of the most ambitious and visionary projects in Africa, and it has the potential to transform Nigeria’s oil and gas sector, as well as the entire economy. The refinery’s first purchase of US crude oil is a milestone that signals the refinery’s readiness to join the global oil market and compete with the best in the world.
Source: Business Day
