December 11, 2023/CSL Research
News reports say the Dangote petroleum refinery received its first shipment of crude oil. The refinery received one million barrels of Agbami crude grade from Shell International Trading and Shipping Company Limited (STASCO), marking a significant milestone in the development of Nigeria’s private refining capacity.
The initial supply of one million barrels is the first of 6 million barrels that would enable an initial run of the refinery to begin the production of diesel, aviation fuel and Liquefied Petroleum Gas, before the refinery later starts producing Premium Motor Spirit. A statement from the Dangote group stated that the next four cargoes will be supplied by NNPC in about three weeks and a final cargo will come from ExxonMobil.
Though we believe the refinery will take some time to reach its full capacity of 650,00bpd, the supply of the one million barrels of crude oil is a welcome development which should kickstart a reduction in the importation of fuel and its lubricants into the country. The output from the refinery would be a boost to the oil refining GDP subsegment. The refinery is expected to have a significant impact on Nigeria’s foreign exchange liquidity through import substitution.
A significant inflow of forex is also expected to come in through export activities from the refinery. Nigeria has suffered a foreign exchange crisis in recent years with demand for forex significantly outstripping supply.
Nigeria’s hope of attaining self-sufficiency in the local domestic oil refining space rest largely on the operations of the Dangote refinery. The refinery, which has one of the largest production capacities in the world, operating at full capacity would more than meet Nigeria’s domestic fuel requirements with excess capacity for exports.
The Managing Director of the Dangote Group, Devakumar Edwin, had earlier in the year stated that 50% of the refinery production will meet 100% of the country’s requirements. While we note that achieving self- sufficiency in local refining capacity might not reduce the cost of petrol significantly, sufficient local refining capacity would at least boost the availability of the product and bring a lasting end to the persistent issue of fuel scarcity in the country.
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