The Dangote refinery, Africa’s largest, is reportedly turning to the United States for a substantial portion of its crude oil requirements, according to a recent report.
A Bloomberg report states that the $20 billion refinery, established by Africa’s wealthiest individual, Aliko Dangote, has issued a term tender to purchase two million barrels per month.
The tender for overseas crude oil from a refinery situated in Africa’s largest producer nation highlights the plant’s significant role in global crude and fuel trading. Upon full operation, it will be the largest refinery facility in Africa.
According to the report, the tender closes at 3 p.m. on May 21. The tender illustrates how Nigerian crudes are struggling to compete against American supply, as one trader of West African barrels remarked.
The refinery, currently under construction in the Lekki Free Zone near Lagos, Nigeria, is a 650,000 barrels per day (BPD) integrated project. It is poised to become Africa’s largest oil refinery and the world’s largest single-train facility.
In March, the Nigerian government expressed concerns over the potential shortfall in local crude oil supply for the Port Harcourt, Kaduna, Warri, Dangote, and BUA refineries after their full readiness.
Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), cautioned that refineries, including modular ones, might face insufficient local crude oil supply without a sector-wide production increase.
Furthermore, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has directed all oil companies in Nigeria to prioritise supplying crude to domestic refineries facing difficulties in procuring it locally.
Producers are only permitted to export crude after fulfilling these domestic supply obligations.
In cases where agreements on crude supply between local refiners and producers are not reached, the NUPRC will serve as an intermediary, facilitating sales purchase agreements through a willing-buyer, willing-seller model.
This new policy stands to benefit the Dangote refinery by allowing it to source crude oil from local suppliers rather than relying solely on imports.
However, the specific volume of crude each refinery will be required to purchase remains uncertain.