Nigeria’s Dangote refinery is expected to reach a production milestone of 550,000 barrels per day (bpd) this year, which represents 85% of its total capacity. However, the refinery is grappling with a significant challenge due to a shortage of domestic crude oil supplies.
Chief Executive Aliko Dangote revealed that the 650,000-bpd capacity refinery, the largest in Africa, has only received five crude oil shipments from the state-owned Nigerian National Petroleum Corporation (NNPC) since it started operations earlier this year. This is a stark contrast to the 15 shipments that were anticipated. To mitigate this shortfall, the refinery has resorted to importing crude oil from international sources, including Brazil and the United States.
Dangote explained that when approaching international oil companies (IOCs) for crude supplies, they are often redirected to brokers, who charge a $4 mark-up per barrel. This additional cost is a significant factor in the refinery’s operations.
The NNPC had previously committed to supplying the refinery with 300,000 bpd, but it is currently struggling with low production levels. Additionally, some of the NNPC’s crude oil is being used in exchange for gasoline imports, further reducing the availability of domestic crude for the refinery.
The Dangote refinery, which was constructed at a cost of $20 billion, began production in January after experiencing several years of delays. This facility is a critical part of Nigeria’s efforts to boost its refining capacity and reduce its dependence on imported refined products. However, the current supply challenges highlight the ongoing issues within the country’s oil production and distribution infrastructure.