Dangote Refinery To Begin Crude Oil Production Soon

Dangote Refinery to Start Oil Production in Q4 2024

The Dangote Refinery, West Africa’s largest, is set to begin crude oil production by the fourth quarter of 2024, according to a recent report by S&P Global Commodity Insights. This significant milestone comes as Dangote continues to address crude supply challenges.

A Dangote Group official, who requested anonymity, said the company is finalising arrangements to secure a floating production, storage, and offloading (FPSO) vessel. “We are looking at an FPSO that can handle around 650,000 barrels of crude oil. This will help us meet our early production targets,” the official confirmed.

Plans for Oil Production from Nigerian Assets

Dangote Group is planning to produce oil from its two assets in Nigeria’s Niger Delta region, under Oil Mining Leases (OMLs) 71 and 72. Initially, production is expected to start at 20,000 barrels per day (b/d), with hopes of increasing output by early 2025.

The Nigerian National Petroleum Company (NNPC) holds a 55% interest in these oil blocks, while Dangote Group controls 85% of West African E&P Venture, the entity with a 45% stake in the same blocks. The location of the oilfields, around 22 kilometers from the onshore Bonny terminal, is crucial to the project’s success.

A senior executive at Dangote Group stated, “We are confident that our upstream projects in the Niger Delta will provide the crude oil needed for the refinery’s operations and help stabilise the nation’s energy sector.”

Dangote Refinery Faces Crude Oil Supply Shortage

Despite the upcoming production plans, Dangote Refinery has faced significant crude oil supply issues since its operations began. This has forced the refinery to import crude oil from countries like Brazil and the U.S. The national oil company, NNPC, has been unable to meet Dangote’s crude requirements, exacerbating the refinery’s reliance on imported oil.

There have also been allegations that international oil companies (IOCs) were inflating crude prices to harm Dangote’s refinery. “We’ve seen clear attempts to manipulate the market, and this has had an impact on our operations,” a Dangote Group source disclosed.

READ ALSO: Nigerian Govt Permits Marketers To Lift Petrol Directly From Dangote Refinery

Government’s Intervention in Crude Oil Sales

To mitigate the supply issues, the federal government recently stepped in to facilitate the sale of crude oil to Dangote in the local currency, naira. This move is aimed at simplifying transactions and easing the refinery’s reliance on foreign oil imports.

Minister of State for Petroleum Resources, Olumide Adeosun, said, “The government is committed to ensuring that the Dangote Refinery succeeds. We have approved the sale of crude oil in naira to support the refinery’s growth and to strengthen our local refining capacity.”

Dangote Refinery’s Impact on Nigeria’s Oil Industry

The $20 billion Dangote Refinery is expected to be a game-changer in Nigeria’s energy sector. When it reaches full capacity, it will become the largest refinery not only in Africa but also in Europe, capable of processing 650,000 barrels of oil per day. This is a major step toward reducing Nigeria’s dependence on imported petroleum products.

Even though Nigeria is Africa’s largest oil producer, it imports most of its fuel due to a lack of functional refineries. The Dangote Refinery aims to close this gap by supplying local markets with petroleum products, thereby easing the pressure on fuel imports.

Aliko Dangote, the CEO of Dangote Group, highlighted the importance of the project, stating, “This refinery is not just for our company; it’s for Nigeria. We will ensure that our country benefits from this world-class facility.”

Future Outlook for Dangote Refinery

With the start of local oil production from its Niger Delta assets, Dangote Refinery is expected to have a more stable crude supply. The company aims to begin selling petroleum products to local marketers soon, as the NNPC will no longer be the sole buyer of its output.

As Nigeria continues to grapple with fuel shortages and the high cost of petroleum imports, the Dangote Refinery is positioned to play a critical role in the country’s energy future. This landmark project could reduce fuel prices, increase local production, and enhance Nigeria’s self-sufficiency in refined oil products.

The successful operation of the Dangote Refinery depends on overcoming its crude supply challenges and achieving its full production potential. With the refinery set to begin crude production by the end of 2024, there is optimism that it will help reduce Nigeria’s reliance on imported petroleum products and stabilise the country’s energy sector.