The Dangote Group aims to begin production at its two Nigerian oil assets in the fourth quarter of 2024, following months of crude supply challenges, according to a report from S&P Global Commodity Insights.
Dangote holds an 85% stake in West African E&P Venture, which has a 45% working interest in the two blocks, with the state-owned Nigerian National Petroleum Company (NNPC) holding the remaining 55%. The other stakeholder, Nigerian upstream player First E&P, operates the Oil Mining Licenses (OMLs) 71 and 72.
These licenses are located in shallow waters in the southeast Niger Delta, just 22 km from the onshore Bonny terminal, and contain the Kalaekule and Koronama oilfields. Discoveries in these blocks date back to 1966, with Shell starting production in 1986. Output peaked at 21,000 barrels per day in 1999 before declining in 2003. Nevertheless, data from Commodity Insights indicates that the fields still possess recoverable resources of nearly 300 million barrels of oil and approximately 2.3 trillion cubic feet of natural gas.
Commodity Insights forecasts that production at these blocks could commence in 2026, potentially reaching 43,000 barrels of oil equivalent per day by 2036. Recently, members of the House of Representatives, including Speaker Tajudeen Abbas and Deputy Speaker Benjamin Kalu, visited the Dangote Refinery in Lagos on July 20, 2024, highlighting the significance of the upcoming production.
While Dangote’s upstream activities are not often discussed, the impending start of production at OMLs 71 and 72 suggests that the Dangote refinery may soon supplement its crude feedstock, which has faced several supply issues in recent months.
The $20 billion refinery began operations in January and initiated its residue catalytic cracker in early September, positioning itself to produce high volumes of gasoline as early as October, according to a company executive.
Designed to reduce Nigeria’s long-standing reliance on imported refined products, the refinery has already produced petrol, diesel, jet fuel, and naphtha for both domestic use and export. However, it struggled to secure sufficient Nigerian crude early on, leading to significant imports of WTI Midland crude from the U.S., resulting in tensions between NNPC, international oil companies, Dangote, and Nigeria’s upstream regulators.
Initially, NNPCL was expected to supply Dangote with 300,000 barrels per day of crude in exchange for a 20% stake in the project, but its stake was ultimately reduced to 7.2%.
According to S&P Global Commodities at Sea, Dangote imported just under 200,000 barrels per day of Nigerian crude in September and has not brought in U.S. crude since mid-July. The company has also explored potential crude supplies from other producers, including Libya, Senegal, and Brazil, as NNPC may only be able to meet 60% of its crude demand.
Commodity Insights analysts predict that the refinery will not achieve steady-state production until around 2027, at which point it is expected to yield approximately 327,000 barrels per day of petrol.
