Nigeria’s oil market is experiencing a big change with the emergence of Dangote oil refinery, poised to shake up the status quo in diesel supply. BusinessDay’s investigation reveals that this move could potentially terminate the hefty annual importation of 2.5 billion liters of diesel from European refiners.
For years, European refiners have enjoyed a thriving market in Nigeria due to the erratic power supply from the national grid, compelling companies across Africa’s fourth-largest economy to heavily rely on imported refined products valued at a staggering $17 billion annually.
Industry analysts and traders interviewed by BusinessDay anticipate that the influx of diesel from the Dangote refinery will exert significant pressure on European refiners, already facing the looming threat of closure due to heightened competition. Farai Ronoledi, an oil trader familiar with the European market, emphasizes that the Dangote refinery’s emergence signifies not only a domestic victory but also heralds a fundamental shift in the global refining landscape.
The Dangote refinery, boasting a colossal investment of $20 billion, commenced operations in January with a capacity to refine up to 650,000 barrels per day (bpd), slated to become the largest in Africa and Europe upon reaching full capacity later this year or the next.
Kelly Norways, an analyst at S&P Global Commodity Insights, forecasts that Nigeria could potentially witness a significant surge in gasoline and diesel supply once the Dangote refinery attains steady-state capacity. This could translate to a substantial reduction in West African gasoline imports, potentially by as much as 290,000 barrels per day between 2023 and 2026.
Despite concerns surrounding the sulfur content in Dangote’s diesel, which has implications for traders in the West supplying the Nigerian market, industry insiders assert that the emergence of Dangote diesel has effectively displaced European competitors, compelling market players to adapt to the new reality.
Data from Klper, a global trade intelligence platform, underscores the significant reliance of West Africa, particularly Nigeria, on European petrol exports. However, the tide is turning as the Dangote refinery disrupts this established pattern, posing challenges for European refineries ill-equipped to meet stringent environmental standards or explore alternative markets.
The Dangote refinery, backed by Africa’s wealthiest individual, Aliko Dangote, was meticulously designed to churn out a staggering 53 million liters of petrol daily, signaling a monumental leap in Nigeria’s refining capacity.
Local oil marketers note that diesel from the Dangote refinery comes with a competitive edge, devoid of vessel costs, import charges, or other expenses associated with traditional imports. This translates to potential cost savings for consumers, with diesel prices at most depots currently ranging between N950 to N1100.
Experts caution that the decline in West African imports could coincide with new environmental regulations in Northwest Europe, compelling refineries to either upgrade or seek alternative markets, further exacerbating the challenges faced by European refiners grappling with closures and dwindling operational capacities.
PAY ATTENTION: FCCPC Urges Nigerians to Report Unfair Trade Practices
Leave a Comment