Nigeria’s new Dangote mega refinery near Lagos is seeking to buy millions of barrels of US crude over the next year as it ramps up processing rates, a sign of the challenges that Africa’s largest producer faces in lifting its own oil output.
The plant, built by Africa’s richest man Aliko Dangote,
issued a so-called term tender for the purchase of 2 million barrels a month of
West Texas Intermediate Midland crude for 12 months starting in July, according
to a document seen by Bloomberg. The tender closes on May 21.
The call for US oil highlights how influential the plant
will be in global crude and fuel trading. It also reflects Nigeria’s struggle
to lift its own crude production, which remains well below theoretical
capacity, as well as Dangote’s willingness to tap cheaper supplies than it can
find at home.
“Supply of Nigerian crude is insufficient or unavailable and
sometimes unreliable,” said Elitsa Georgieva, executive director at Citac, an
energy consultancy specializing in the African downstream sector. “WTI on the
other hand, is available, with reliable supply and competitively priced.”
Buying different feedstocks also provides flexibility and
optionality for the refinery, so the tender makes economic sense for Dangote,
Georgieva said.
Nigeria has been unable to meet its OPEC+ quota for at least
a year.
The nation pumped about 1.45 million barrels a day of crude
and liquids in April, still far below its estimated production capacity of 2.6
million barrels a day. Crude theft, aging oil pipelines, low investment, and
divestments from oil majors operating in the West African nation have all
contributed to declining production.
To ensure enough local supply to the giant 650,000
barrel-a-day Dangote refinery, Nigeria’s upstream regulators released new draft
rules last month that will compel its oil producers to sell crude to domestic
refineries.
The plant, currently running at about half capacity, is
taking advantage of cheaper US oil imports for as much as a third of its
feedstock. Since the start of this year, it has received at least one
supertanker carrying about 2 million barrels of WTI Midland each month.
An official at Dangote declined to comment.