In a major development for Nigeria’s energy sector, the Nigerian National Petroleum Company (NNPC) Limited has signed a 10-year gas supply agreement with the Dangote Refinery. The deal, which represents a renewed effort to address longstanding challenges and secure energy sufficiency for the country, is expected to drive the refinery to full capacity production.
Under the agreement, NNPC Gas Marketing Limited (NGML), a subsidiary of NNPC Ltd., will supply 100 million standard cubic feet of natural gas daily to the Dangote Refinery in Ibeju-Lekki, Lagos State. This supply arrangement comprises 50 million cubic feet guaranteed daily and an additional 50 million cubic feet on a flexible basis. The supply will last for an initial 10 years, with options for renewal.
“This collaboration is a significant step toward ensuring the operational success of the Dangote Refinery and enhancing Nigeria’s domestic gas utilization. It represents a milestone for both NNPC Ltd. and Dangote Refinery, aligning with their shared commitment to boosting local production and providing vital products for the benefit of all Nigerians,” NNPC spokesperson Olufemi Soneye stated.
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A Turning Point for Production and Energy Security
Energy analysts believe that this new agreement, if effectively implemented, will turn the tide in Nigeria’s oil sector. The guaranteed supply of 100 million standard cubic feet of gas daily is expected to address the refinery’s energy needs, enabling it to ramp up production toward its full capacity of 650,000 barrels per day (bpd). Currently, the refinery operates at approximately 420,000 bpd due to supply bottlenecks.
The Dangote Refinery has the potential to meet Nigeria’s domestic energy needs, estimated at 40 million liters of petrol daily, and export to neighboring countries, including Ghana, Togo, and Benin Republic. With an uninterrupted gas supply, the refinery will be better positioned to stabilize Nigeria’s fuel market, reduce dependency on imports, and contribute to energy security across the region.
Analysts believe that this collaboration also underscores the importance of public-private partnerships in addressing Nigeria’s critical energy challenges, and signals a shift toward maximizing the country’s abundant gas reserves to power industries, support businesses, and create jobs.
NNPC’s Past Challenges of Crude of Supply
The Dangote Refinery, a $20 billion project and Africa’s largest single-train refinery, began operations with the ambitious goal of transforming Nigeria’s energy industry. However, insufficient gas supply from the NNPC significantly hampered production, forcing the refinery to source for crude oil outside Nigerian shores.
Sources familiar with the matter revealed that the NNPC repeatedly failed to meet its contractual obligations for gas delivery, creating disruptions in refining operations and raising questions about the government’s commitment to supporting the private sector.
The situation strained the relationship between the Dangote Group and NNPC. Initially, the NNPC had a 20% stake in the refinery, but in 2024, the Dangote Group cut the corporation’s stake to 7.2%. This decision was reportedly driven by dissatisfaction with the NNPC’s inability to deliver on critical commitments, including the promised gas supply.
However, the successful implementation of this agreement could mark a turning point for Nigeria’s energy sector. Beyond addressing immediate supply challenges, it aligns with the broader goal of transitioning from a crude oil-dependent economy to one that fully utilizes its gas resources.
The Dangote Refinery’s success is expected to significantly reduce Nigeria’s reliance on imported petroleum products, saving billions in foreign exchange and enhancing the country’s economic resilience. Moreover, according to industry experts, its ability to supply fuel to neighboring countries could position Nigeria as a regional energy hub, contributing to economic integration and development across West Africa.
However, analysts note that while this agreement holds great promise, its success will depend on the NNPC’s ability to consistently deliver on its commitments. The stakes are also said to be high for both parties, as the Dangote Refinery’s operational efficiency is vital to Nigeria’s energy security and economic stability.
This agreement, which exemplifies the potential of strategic partnerships in addressing systemic challenges and driving transformative change, is expected to catalyze similar partnerships across other industries, fostering broader economic growth and industrialization. It is believed that with this partnership, Nigeria takes a significant step closer to realizing its potential as an energy powerhouse, leveraging strategic collaborations to drive long-term economic growth.