By Adedapo Adesanya
S&P Global Commodity Insights has projected that when the Dangote Refinery finally ramps up refining activities, it could massively reduce West Africa’s petrol imports from Europe by as much as 290,000 barrels per day.
This was disclosed during a panel discussion themed Exploring West Africa’s Oil Product Flows in a Changing Refining Landscape by S&P analysts, including Mr Joel Hanley, Mr Matthew Tracey-Cook, Ms Kelly Norways and Ms Elza Turner.
The panellists noted that the 650,000 barrels per day $19 billion facility in Lagos will before 2026, significantly change the fuels supply landscape in West Africa.
“Once we see the refinery ramp up, that could mean that West African gasoline imports or the import reliance that they have at the moment could drop by as much as 290,000 barrels per day between 2023 and 2026. So really, this could become quite a dominant supplier in the West African market, subject to when we start to see those barrels hit the market in Nigeria and the local region,” said Ms Norways, Downstream Sector Oil analyst at S&P.
Also, S&P said that Nigeria recently cut the maximum sulphur content for gas oil imports from 3,000 parts per million to below 500 parts per million, thereby significantly stifling the import of the product from Europe to Nigeria.
“Once Nigeria sees Dangote reach a steady state capacity, that could mean some 327,000 barrels per day of gasoline (petrol) supply and 244,000 barrels per day of diesel or gas oil. In practice, how that splits between the domestic market and the export market remains to be seen.
“There’s a significant amount of pressure from the Nigerian government for significant volumes of that supply to flow to the domestic market to try and solve this cost of living crisis and prevent significant pay-outs that need to be made onto importing those large volumes.
“But in reality, when we see that start to scale up is still subject to debate. Dangote has been espousing some pretty punchy timelines.”
Mr Hanley also said that the Dangote refinery may also reduce the cargo that often sits off the coast of West Africa.
“If you’ve ever been to Lagos, you see these enormous queues of refined products tankers waiting there. Now, one thing that I think people thought might relieve some of the pressure and, as I said, redress the imbalance somewhat would be the Dangote refinery.
“And it’s finally got going, not fully up to speed perhaps, but we started to see a cargo coming out, which is exciting,” stated the Director at S&P.
Mr Hanley also stated that while the ramp-up is important, it was also important for the firm to look at ‘where the money is.’
“As you said, there’s pressure from the Nigerian government because, of course, they would like this much-vaunted, long-awaited, Waiting for Godot kind of refinery to supply the local market and take some of the pressure off.
“But if the international markets are prepared to pay up for that product, then it’s going to be tricky. It’s a very tricky balance to decide where that flow will go,” Mr Hanley added.
