*The Organisation of Petroleum Exporting Countries says supplies from the Dangote Petroleum Refinery will exert pressure on the operations of Europe鈥檚 oil industry, the development which experts have opined will positively impact the Nigerian economy

Gbenga Kayode | 绿帽献妻

As the 650,000 barrel per day (bpd) capacity oil-refining facility recently began production, the Organisation of Petroleum Exporting Countries (OPEC), has said product supplies from the Dangote Petroleum Refinery and Petrochemicals, Nigeria-based world’s largest single-train refinery, will put pressure on the operations of Europe鈥檚 oil industry, especially the Northwest Europe (NWE) Gasoil.

OPEC, in its newly released monthly Oil Market Report for June 2024, listed Dangote Petroleum Refinery among the top diesel and jet fuel suppliers that would disrupt Europe鈥檚 oil & gas Industry.

Photo collage of Alhaji Aliko Dangote, President/CE of Dangote Industries Limited, and Petroleum Refinery

Dangote Group, in a statement Thursday, August 8, 2024, noted experts forecast the development would positively impact the Nigerian economy.

It is recalled that Standard & Poor Global quoting trading and the ship tracking sources had earlier predicted that Nigeria’s $20 billion Dangote Petroleum Refinery would shake up international crude flows when it reaches full capacity.

The company affirmed that it already made an impact since coming on stream January 2024, citing trading sources and ship tracking data.

The OPEC report further revealed that 鈥淯pside potential for higher production levels from Nigeria鈥檚 Dangote Refinery, coupled with strong flows from the Middle East and new supplies from the Mexican Olmeca Refinery, would likely exert pressure on NWE gasoil performance in the mid-term.鈥�

The report also stated: “Europe is one of the world鈥檚 largest purchasers of refined petroleum products, and relied on imports from Asia and the US after the European Union banned the use of Russian diesel in the bloc.”

However, the 650,000bpd capacity refinery, owned by the Africa鈥檚 richest man, Aliko Dangote, is eyeing the wider European market after International Oil Companies stopped supplying its crude oil.

Devakumar Edwin, Vice-President of Oil and Gas at Dangote Industries Limited (DIL), recently announced that the company had exported its first jet fuel cargo to Europe as it rapidly scales production in the West African country.

Edwin disclosed the refinery exported 90 percent of its 3.5 billion litres of jet fuel and diesel to Europe over alleged lack of support from the Nigerian Government.

The Vice-President Oil and Gas at DIL, further stated: “It is good to note that from the start of production, more than 3.5 billion litres, which represents 90 percent of our production, have been exported.”

BP is currently transporting its first jet fuel cargo from Dangote to Rotterdam, after being awarded part of a 120,000 metric tonnes tender offered for the end of May this year, according to S&P Global.

OPEC stated: 鈥淚n June, the jet/kerosene crack spread in Rotterdam against Brent showed a slight decline, influenced by supply-side dynamics.

“Despite signs of improving air travel activities, subdued jet fuel demand from the aviation sector weighed on the product market.

鈥淕oing forward, European jet/kerosene demand is expected to see upward pressure as consumption levels from the aviation sector continue to pick up in the coming months.鈥�

S&P had noted that Dangote Refinery in its first six months, scaled to 400,000 b/d and delivered diesel, jet fuel, naphtha, and fuel oil to both domestic and export markets, with Gasoline, Nigeria’s primary fuel type, being expected to be produced from mid-August.

Notwithstanding, the refinery has already affected crude flows, with dozens of Nigerian cargoes remaining in-country and US WTI Midland, a comparable light, sweet grade, being imported.

The mega-refinery could therefore, tighten the light, sweet crude market.

“Its diet is WTI and the lighter Nigerian [crudes], so if you were chasing those barrels you’d probably feel it quite keenly,” a West African crude trader told Commodity Insights. “Once they get to 650,000 b/d without any WTI Midland, ‘severely disrupted’ [will be] the headline.”

According to Dangote Petroleum Refinery, WTI Midland crude initially, emerged as the favoured feedstock to supplement Nigerian supply, with the refinery signing long-term supply contracts for the US grade, noting its competitive pricing.

Platts, part of Commodity Insights, last assessed WTI Midland into Rotterdam at $82.36/b on July 31, while Nigeria’s Bonny Light was assessed at $82.80/barrel on the same day.

Crude flows in and out of the Dangote Petroleum Refinery have been felt in other markets, especially in Europe, the largest consumer of light, sweet Nigerian crude, the statement noted.

The US grade has accounted for 30 percent of crude delivered to Dangote, through 18 cargoes.

Aliko Dangote, President/Chief Executive of Dangote Group, said the facility would broaden its feedstock sources with Libyan, Angolan, and Brazilian crude.

“The refinery was built to use Nigerian crude and add value to it within Nigeria. Why should we deviate from that focus?” said Dangote.

He also stated that the crude supply issues were “getting resolved”, but that the refinery remained open to all opportunities “to supplement it.”

“Dangote Refinery is designed to process a range of light and medium grades of crude oil, including Nigerian grades,” said Rasool Barouni, Associate Director and Head of Refining at S&P Global Commodity Insights.

“Other similar grades including other WAF grades could be an option.”

Nigeria is sub-Saharan Africa’s largest oil producer, pumping 1.5 million b/d in June, according to the Platts OPEC Survey from S&P Global Commodity Insights.

Until this year, all of its oil was exported due to the lack of refining capacity, with gasoline, diesel, and jet fuel imported for domestic use.

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