Owned by Africa’s richest man, the new refinery is seen as the answer to persistent fuel shortages at Africa’s biggest oil producer.
Nigeria commissioned the Dangote refinery on Monday in hopes of turning the country into a net exporter of petroleum products, but analysts said securing crude supplies could delay reaching full production this year .
Incumbent President Muhammadu Buhari’s administration sees the refinery as the answer to persistent fuel shortages in Nigeria – including most recently as February approaches. disputed presidential election.
Nigeria spent $23.3 billion last year on imports of petroleum products and consumes about 33 million liters (8.7 million gallons) of gasoline per day. The Dangote refinery has a capacity of 650,000 barrels per day.
The plant plans to export excess oil, turning Africa’s largest oil producer into a hub for the export of petroleum products. It also plans to export diesel, according to Aliko Dangote, Africa’s richest man, who financed the construction of the refinery.
The massive petrochemical complex, which would be the largest single-train refinery in the world, cost $19 billion to build after being delayed by nearly a decade – above initial estimates of between $12 billion and $14 billion – and has an outstanding debt of around $2.75 billion, according to the governor of Nigeria’s central bank.
The complex also has a 435 megawatt power plant, a deep water port and a fertilizer unit.
Speaking at the commission ceremony, Dangote said the priority was to increase production to ensure the refinery could fully meet Nigerian demand and eliminate “the tragedy of import dependency”.
The ceremony took place in the presence of President Buhari.
![Nigerian President Muhammadu Buhari speaks during the commissioning of the Dangote Petroleum refinery at Ibeju-Lekki, Lagos, Nigeria May 22, 2023. [Temilade Adelaja/Reuters]](https://www.aljazeera.com/wp-content/uploads/2023/05/2023-05-22T145055Z_1487849945_RC2P31ACQGJQ_RTRMADP_3_NIGERIA-REFINERY-DANGOTE-1684769528.jpg?w=770&resize=770%2C513)
Crude supply issues
Dangote plans to start refining the crude in June, but London-based research consultancy Energy Aspects said commissioning was a complex process and it expects operations to begin later this year, reaching 50-70% next year, with a phased process of other units. in 2025.
The refinery needs a constant supply of crude, but Nigeria’s oil production has declined due to oil theft, pipeline vandalism and underinvestment. In April, production fell below one million barrels per day (bpd), below Angola’s production.
A drop in production would affect the ability of state oil company Nigerian National Petroleum Corporation (NNPC) to fulfill a deal to supply the Dangote refinery with 300,000 bpd of crude, said economist Kelvin Emmanuel, who wrote a report on the theft of oil last year.
NNPC, with a 20% stake in the refinery, has production sharing agreements with oil majors like ExxonMobil, Shell and Eni and is entitled to a portion of the crude, which it also trades with traders for gold. gasoline and diesel.
The refinery has not signed an agreement to obtain supplies from the Nigerian oil majors.
This could see Dangote import crude from traders like Trafigura and Vitol, Emmanuel said, at a time when local refining needed to save currency and keep prices lower.
Energy Aspects, however, said that in the long term, the Dangote refinery could end Nigeria’s oil deficit, reshape the Atlantic Basin oil market and export diesel that meets European Union specifications.