Nigeria’s monumental $19 billion Dangote Refinery project is set to commence fuel production as the first crude shipment arrives at the facility, marking a significant milestone for the country’s oil industry.
The OTIS tanker, carrying a 950,000-barrel cargo of Nigeria’s Agbami crude, set sail on December 6 and is en route to Lekki, the nearest land port to Dangote’s offshore crude receiving terminal, according to industry sources and tanker tracking data reported by S&P Global. The tanker is expected to arrive on December 7 around 8pm.
This development follows months of delay that has dampened the hope of many Nigerians who are hoping on the refinery to ease the pain of the high cost of petroleum products, orchestrated by the petrol subsidy removal.
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The state-owned Nigerian National Petroleum Company (NNPC), which holds a 20% stake in the refinery with a payment mechanism that includes both cash and crude oil supply, chartered the Suezmax tanker, symbolizing the initiation of crude supplies for the refinery’s operations, according to industry reports.
While many attribute this development to the NNPC’s reported plans to supply the Dangote Refinery with six crude oil cargoes in December for a test run, it unequivocally signifies the initiation of the refinery’s full-scale operation.
Despite the refinery’s official completion in May, the lack of domestic crude feedstock had hindered oil product manufacturing. To address this, the NNPC recently entered an agreement to supply 6 million barrels of crude oil as feedstock to the Dangote refinery in December, aiming to kickstart operations.
However, a development last month, when a report emerged that the NNPC is facing challenges in meeting its obligation, cast doubt on the refinery’s capacity to commence operation. The NNPC is expected to supply crude oil worth $1 billion to the Dangote Refinery, part of its payment for the acquisition of a 20 percent equity stake in the refinery.
The Agbami crude, operated by Chevron, is one of Nigeria’s major deepwater developments with a daily output of approximately 100,000 b/d in the central Niger Delta. It is known for its light sweet crude qualities with a specific gravity measuring 47.9 API and a low sulfur content of 0.04%, yielding significant proportions of naphtha and kerosene.
NNPC has chartered further shipments from various Nigerian offshore fields to the refinery, signifying the beginning of a series of scheduled crude supplies throughout this month, according to industry insiders.
The Dangote Refinery, located on the outskirts of Lagos, faced recurrent delays since its announcement in 2013. Despite substantial installation progress in 2019, delays persisted.
In June, a report from Energy Times indicated that the refinery is not anticipated to become operational until March 2024. This delay was attributed to the refinery being at an 88% completion stage, with some equipment still awaited from manufacturers. Additionally, those components that had been installed were yet to undergo the necessary integrity tests at the commissioning stage.
The refinery, designed to process multiple crudes concurrently, aims to process three Nigerian crude grades — Escravos, Bonny Light, and Forcados. At full operational capacity, the facility is expected to produce a daily output of 327,000 b/d of gasoline, 244,000 b/d of gasoil/diesel, 56,000 b/d of jet fuel/kerosene, and 290,000 mt/year of propane/LPG.
While Dangote officials anticipate an initial output of 370,000 b/d, industry analysts expect the refinery to reach its full operational capacity around mid-2025, though potential delays still loom.
The commencement of Dangote’s operations raises hopes for Nigeria’s aspiration to reduce its reliance on petrol imports, potentially transforming the country’s oil industry landscape.