The construction of the Dangote refinery took over 20 years and now offers a processing capacity estimated at hundreds of thousands of barrels per day, including 250,000 barrels of gasoline and 100,000 barrels of diesel.
Supplying the local and international oil markets
Aliko Dangote, the richest man in Nigeria and Africa, has ambitious plans to promote energy independence for his country and the region. However, this vision may be at risk. The massive oil refinery, which has the potential to end decades of gasoline trade between Europe and Africa worth 17 billion USD per year, faces significant challenges.
Concerns are high as numerous problems have emerged before and since the commissioning of the 20 billion USD refinery. According to a Reuters report, the refinery aims to produce oil for both local consumption and international trade. Already, 150,000 service stations managed by the Independent Petroleum Marketers Association of Nigeria (IPMAN) have been authorized to receive fuel from Dangote’s new private refinery.
Freeing Nigeria from its energy problems
Since it’s commissioning in January, the refinery has processed about 8 million barrels of oil between January and February. According to a Reuters report, it will take two months to reach its full capacity. Devakumar Edwin, Vice President of Dangote Group, states that the refinery will reach 500,000 barrels per day by the end of August, a number higher than the national consumption of 480,000 barrels per day, allowing for the export of the excess.
Dangote, whose financial actions demonstrate his patriotic commitment, has faced numerous challenges. However, his heroic act of investing in his country and his vision of freeing Nigeria from its energy problems are becoming increasingly realistic. “We have been facing a fuel crisis since the 1970s. This refinery can help solve the problem,” he said.
Challenges of the refinery
Since January, when Dangote’s oil refinery began operations, it has struggled to ensure sufficient crude supply in Nigeria. The gigantic refinery, which is supposed to produce fuel for Nigeria in August, is operating at about half its capacity.
The oil group is exploring the possibility of sourcing crude from another African oil producer, Libya, as an alternative to purchases from the United States and Brazil. Nigeria is Africa’s largest oil producer. However, oil theft, pipeline vandalism, and lack of investment have hindered the West African country’s ability to capitalize on its oil sector fully.
Additionally, Nigerian midstream and downstream companies have claimed that Dangote’s diesel contained more sulfur than the legal limit of 200 parts per million (ppm). Dangote, for his part, denied that the petroleum products manufactured by his refinery were of poor quality.
Competition and Export
If all goes well, the refinery, once at full capacity, will become the largest in Africa. However, its success depends on the company’s ability to manage the energy market’s problems. Data from the refining industry body Concawe indicates that at least 30 European refineries have closed since 2009, with nearly 90 plants of various sizes and complexities in operation.
European refineries do not generate enough diesel to meet regional demands. They generate an overproduction of gasoline and rely on exports to sell the excess production. For a long time, West Africa has been the primary market for gasoline that does not comply with the stricter environmental restrictions imposed by Europe in terms of sulfur and metals.
The Dangote refinery is configured to produce up to 53 million liters of gasoline daily, or about 300,000 barrels per day. The decrease in West African imports coincides with new environmental laws in northwestern Europe, forcing plants to reconfigure, seek new markets for lower-quality gasoline, or shut down.
