Dangote Refinery, Africa’s largest single-train refinery with a daily capacity of 650,000 barrels, is pivoting away from importing crude oil from the United States. Instead, it will increasingly source its feedstock from Nigerian suppliers, according to a Bloomberg report.
Starting in the third quarter of 2024, the refinery plans to obtain over 80% of its crude oil from local sources, up from less than 75% in the previous quarter. This shift comes in response to recent federal government measures aimed at reducing foreign exchange pressure and simplifying transactions by selling crude oil to the refinery in Naira. The move is intended to stabilize the pump price of refined fuels and improve the dollar-naira exchange rate.
Aliko Dangote, CEO of the refinery, has previously voiced frustration over difficulties in securing local crude oil. His plants have relied on imports from the United States and Brazil due to insufficient supply from the Nigerian National Petroleum Corporation (NNPC) and other international oil companies (IOCs). At one point, up to one-third of the refinery’s feedstock was imported from the U.S.
Recent developments indicate that the refinery will receive six shipments of crude oil from NNPC in the coming month, each containing approximately one million barrels. Additionally, two more shipments from Nigerian sources and two million barrels of WTI Midland crude are expected to arrive in September.
In a related development, the Federal Government has warned companies holding oil block licenses that have failed to invest or engage in exploration activities. Heineken Lokpobiri, the State Minister of Oil, announced that licenses will be revoked if holders do not comply with investment requirements.
Lokpobiri criticized companies that have not utilized their licenses for exploration, calling them "souvenirs" rather than assets. He emphasized the importance of effective exploration to the success of the upstream oil sector, which in turn affects the midstream and downstream sectors.
Of the 60 licenses awarded in the recent oil block bidding, only 10 companies have begun attracting investment and conducting exploration. The government aims to improve the exploitation of Nigeria’s estimated 37.5 billion barrels of crude oil and 209.26 trillion cubic feet of natural gas reserves.
The upcoming 2024 oil block licensing round seeks to attract more investment and halt the flow of capital to rival African countries like Angola and Namibia. Nigeria’s oil production has declined from around 2 million barrels per day a decade ago to just over 1.4 million barrels per day, partly due to the shift of oil majors from onshore fields to more stable deepwater areas.
As the Dangote Refinery adjusts its strategy and the federal government takes steps to enhance local oil production, these developments could significantly impact Nigeria’s oil industry landscape.
