Africa’s wealthiest individual, Aliko Dangote, is embarking on a significant venture in the oil industry, aiming to establish an oil trading arm, likely headquartered in London.
Dangote refinery
This initiative is intended to facilitate the operation of his new refinery in Nigeria, according to six sources familiar with the matter.
The move signifies a shift in the dynamics of the oil trading sector, potentially reducing the influence of major trading firms. These firms have been engaged in prolonged negotiations with Dangote to provide financing and crude oil for the refinery’s operations in exchange for product exports.
Dangote, whose net worth is estimated at $12.7 billion by Forbes, has remained tight-lipped regarding inquiries about the development.
The massive refinery, with a capacity of 650,000 barrels per day, is poised to significantly impact global oil and fuel flows. Industry observers are closely monitoring its operational strategy.
Key players in the trading industry, including BP, Trafigura, and Vitol, have held meetings with Dangote in Lagos and London in recent weeks.
They have offered loans amounting to approximately $3 billion to cover the working capital required for crude oil procurement. However, negotiations regarding loan repayment through fuel exports have yet to yield any agreements.
Dangote’s reluctance stems from concerns about relinquishing control over the project and potential profit implications.
In a bid to secure financing and crude oil, Dangote has also engaged with state-backed firms.
Sources reveal that Dangote intends to establish his own trading team to oversee operations. Radha Mohan, a former Essar trader who joined Dangote in 2021 as the director of international supply and trading, is expected to lead the team. Recruitment efforts are underway to expand the team with two additional traders.
Despite facing delays and cost overruns, the refinery, which took nearly a decade to complete, has processed approximately eight million barrels of oil between January and February. However, it is anticipated to take several months to reach full capacity.
To support the refinery’s operations, Vitol has prepaid for some product cargoes, while Trafigura has engaged in crude oil swaps for future fuel cargoes. Both Vitol and Trafigura have declined to comment on the matter.
