Dangote Refinery, a major player in the Nigerian oil industry, is seeking to procure a substantial quantity of crude oil from the United States, amidst the ongoing challenges faced by the Nigerian oil sector.

The Dangote Refinery has made public its intention to procure an additional 11 million barrels of crude oil from the United States. This move highlights the ongoing challenges faced by Nigeria in terms of oil production.

The refinery, a crucial component in the nation’s aspiration to become a net exporter of petroleum products, has encountered the need to supplement domestic supply with imports to satisfy its operational requirements.

In a tender observed by Bloomberg, Dangote procured five million barrels of West Texas Intermediate (WTI) Midland crude for delivery in the upcoming month and September. Additionally, the company initiated a tender process to acquire an additional six million barrels of American crude for September.

The Lagos refinery primarily relies on local crude supplies, which can be swiftly transported from offshore terminals within a few days.

According to tanker-tracking data, the refinery processed over 41 million barrels of feedstock during the first half of the year as it conducted test runs and progressively increased its processing capacity. Approximately one-fourth of this feedstock originated from the United States.

The chairman of Dangote Group, Aliko Dangote, stated that the refinery will continue to import crude oil as it ramps up production and explores alternative supply agreements.

“It also makes economic sense for us to tender for crude. If we could source 100 percent Nigerian crude, then fine, but we can’t wait,” Dangote said at the Africa CEO Forum 2024.

“There is a bit of a problem for us to source the entire volume of crude that we’re looking for domestically because we need different types and mixes. Unless crude production improves – which we pray and hope for – we need to go elsewhere,” Dangote added.

As per the information provided by CAS, the refinery received 11 shipments of WTI crude, equivalent to approximately 9 million barrels, during the period from February to May. This stands in contrast to the roughly 18 million barrels of Nigerian crude that were delivered during the same timeframe.

The recent move to secure a longer-term offtake agreement indicates the refinery’s commitment to diversifying its crude sources on a more permanent basis. This decision aligns with the current market conditions characterized by exceptionally weak demand for Nigerian crude supply.

“It’s a little surprising that they are seeking term WTI at this stage,” said one West African crude trader, noting demand weakness that pushed Nigeria’s flagship Bonny Light crude to a discount to Dated Brent for the first time since November on May. 17.

The Nigerian”National Petroleum Company (NNPC), a state-run entity in Nigeria, holds a 20% equity stake in the Dangote Refinery project. It was widely anticipated that NNPC would supply the majority of Dangote’s crude oil requirements, with transactions conducted in USD due to the refinery’s location in the Lekki free zone.

However, recent assessments indicate that NNPC has encountered challenges in fulfilling its obligation to provide 300,000 barrels of crude oil per day (bpd) to secure its 20% stake in the Dangote Refinery.

The nation’s crude oil production averaged approximately 1.28 million barrels per day in June, which remains significantly below its estimated production capacity of 2.6 million barrels per day. Several factors have contributed to this decline, including crude theft, aging oil pipelines, insufficient investment, and divestments by major oil companies operating in the West African nation.

In spite of the assurances given by the federal government and the Nigerian National Petroleum Company Limited (NNPC) regarding meeting the country's Organisation of Petroleum Exporting Countries (OPEC) quota, Nigeria experienced an approximate underproduction of 30 million barrels in the initial four months of 2024.

Despite extensive efforts to address insecurity in the Niger Delta region by the NNPC and the federal government, incidents of oil theft, asset vandalism, and sabotage continue to be prevalent in the area where Nigeria's oil is extracted.

The nation presently has a multi-billion-naira contract with regional private security organizations in addition to the substantial expenditures made on the official security forces deployed to address the regional threat.