Dangote refinery, A major player is emerging in the global oil market, and it’s not just any player.
The Dangote Refinery, located in Lagos, Nigeria, is set to significantly impact Europe’s refined petroleum product market, according to a recent forecast by the Organisation of Petroleum Exporting Countries (OPEC).
The $20 billion refinery, owned by Africa’s richest man, Aliko Dangote, has already begun operations and has already started influencing global oil flows. With a capacity of 650,000 barrels per day, the refinery is expected to challenge Europe’s reliance on established sources of diesel and jet fuel. Dangote had earlier offered to sell off the multibillion dollar refinery to NNPC.
According to OPEC’s June 2024 Oil Market Report, the refinery’s potential production increases are expected to exert pressure on Europe’s refined petroleum product market, particularly in the Northwest Europe (NWE) gasoil market. The report notes that the refinery’s upside potential for higher production levels will likely disrupt traditional diesel and jet fuel suppliers.
The refinery’s impact on the global oil market is already being felt. In January, the refinery began exporting jet fuel to Europe, and its first successful export was recently confirmed. The refinery’s vice president of oil and gas, Devakumar Edwin, said that over 90% of its production has been exported since its start of production.
However, the refinery’s rapid expansion has not been without challenges. It has faced difficulties securing adequate crude supplies from within Nigeria, leading to the importation of U.S. WTI Midland crude. This has begun to tighten the global market for light, sweet crude oils like Nigeria’s Bonny Light.
Aliko Dangote has addressed concerns regarding the refinery’s crude sourcing strategy, reaffirming its primary focus on Nigerian crude. However, he also acknowledged that the refinery remains open to sourcing from other regions, including Libya, Angola, and Brazil.
As the refinery continues to scale up, it is expected to further disrupt the global oil market, with significant implications for both European refiners and Nigeria’s position in the global energy landscape. The refinery’s full capacity could significantly reshape international crude markets, according to Standard & Poor Global.
With its sights set on the European market after international oil companies ceased supplying it with Nigerian crude, the Dangote Refinery is poised to become a major player in the global oil market. As it continues to operate at full capacity, it is expected to have a significant impact on global oil flows and refined petroleum product markets.
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