The Nigeria’s Nigerian National Petroleum Corporation, NNPC, has assured a steady supply of 300,000 barrels a day, b/d of crude to the 650,000 b/d Dangote oil refinery, which is still under construction.
The plan is to bolster domestic fuel supply and guarantee outlets for its crude, the NNPC said on August 25.
This comes a few weeks after the Nigerian government approved a bid by NNPC to acquire a 20 per cent stake in the Dangote project.
“We will have a right to 20 per cent of production from this facility. We structured our equity participation on the basis that the refinery must buy at least 300,000 b/d of crude oil of our production,” Mele Kyari said in a statement.
“This guarantees our market at a period when every country is struggling to find markets for their crude oil.” according to S&P Global.
Nigeria currently exports almost all of the crude and condensate it produces.
A lack of upstream investment in Nigeria along with OPEC+ cuts has contributed to a steady fall in its oil production over the past decade. Despite having the capacity to pump around 2.2 million-2.3 million b/d of crude and condensate, output has averaged around 1.62 million b/d so far in 2021, according to S&P Global Platts estimates.
The Dangote plant, located on the outskirts of Nigeria’s commercial capital Lagos, is expected to start commissioning in early 2022, project head Devakumar V G Edwin previously told Platts.
But many sources are not convinced the refinery will be ready by next year. Some industry sources told Platts that the refinery might struggle to come on stream before late 2022 or early 2023 as delays caused by COVID-19 continue to slow the project.
The startup of the Dangote refinery has been repeatedly delayed since the project was unveiled in 2013, although most of the key units were received in 2019.
The crude distillation unit has been designed to process 12 crudes at one time and has been engineered to process three Nigerian crude grades — Escravos, Bonny Light and Forcados.
The plant will yield 327,000 b/d of gasoline, 244,000 b/d of gasoil/diesel, 56,000 b/d of jet fuel/kerosene, as well as 290,000 mt/year of propane/LPG when fully operational, according to a Dangote presentation given at an industry event last year.
Fuel imports come at a huge cost to Africa’s largest oil producer, which has endured a tricky 18 months due to the oil price crash and lower production as a result of the COVID-19 pandemic.
Nigeria has been desperate to reform its downstream sector for almost a decade now, but progress has been slow.
All of Nigeria’s oil refineries, with a combined nameplate capacity of 445,000 b/d, are currently shut, following years of neglect, even as NNPC has been looking to reform the sector for almost a decade.
Nigeria imports around 1 million-1.25 million mt/month of gasoline due to inadequate domestic refining capacity.
The imports come at a cost to Africa’s largest producer, which endured a choppy 2020 due to the oil price crash and the pandemic.