US, European refiners to face competition as Dangote targets 2021

With Dangote refinery expected to begin operations next year, refiners in the United States and Europe are at risk of a significant drop in their fuel exports to Nigeria.

The US exported 1.12 million barrels of petrol to Nigeria last year, data obtained from the US Energy Information Administration showed on Wednesday.

European refineries currently supply a large portion of petroleum products consumed in the country and other West African countries.

Nigeria, Africa’s largest oil producer, relies largely on importation for petrol and other refined products as its refineries have remained in a state of disrepair for many years.

The refineries, located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day but have continued to operate far below the installed capacity.

“Nigeria represents a paradox of being a major exporter of crude oil, and a leading importer of petroleum products at the same time,” the Director General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, told our correspondent.

With a capacity to process 650,000 barrels of crude oil daily, Dangote refinery, located in Lagos, has been described as the largest single-train facility in the world.

The President, Dangote Group, Aliko Dangote, said last Saturday that Nigeria would become the largest exporter of petroleum products in Africa after the completion of the refinery.

“We will finish mechanical [part] by the grace of God end of this year, and then testing. We will have products beginning of next year,” he said during a visit by the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, to the project site in Lagos.

He said the refinery as well as the fertiliser plant set to be inaugurated in May this year would help to create jobs in the country and reduce the outflow of foreign exchange.

“When this project was launched, we started when the rate of exchange was N122 [to a dollar]. But despite the rate at over N300, we are still going on and we are determined to finish. By July latest, the 500MW power plant will be ready, and we will have power here,” Dangote added.

In December, Dangote Petroleum Refinery and Petrochemicals Company announced the arrival of the crude distillation column equipment, key equipment that would process crude oil in its refinery.

The equipment, which was manufactured by Sinopec in China, was said to have taken 14 months to be constructed and eight weeks to arrive in Nigeria.

Dangote Group said in November that it planned to export petroleum products from its refinery to Europe, South America, West Africa and Central Africa.

The Executive Director, Strategy, Capital Projects and Portfolio Development, Dangote Group, Devakumar Edwin, said products from the refinery could be marketed anywhere in the world.

“It is one of our targets to take diesel to Europe. Our equipment is already being designed to do this. We can take surplus petrol to South America, apart from West African countries and Central African countries. That is why we decided to go for Euro V. The refinery can handle all the Nigerian crude grades and all the African crude grades, as well as some of the Middle East grades and the US light oil,” he said.

According to him, the refinery can meet 100 per cent of the Nigerian requirements of all the liquid products and will have surplus to export.

“There is no doubt that the construction of the 650,000 bpd Dangote refinery in Nigeria will be a landmark both for the oil industry in West Africa and the shipping sector,” HIS Market said in a recent report.

It said based on current plans, the refinery could have an annual production of 10.4 million tonnes of petrol, 4.6 million tonnes of diesel and four million tonnes of jet fuel.

“The plan includes the refinery to deliver its fuels to the Nigerian market, effectively replacing all imports of fuel once fully operational,” it added.

According to the IHS Market, since West Africa has been importing more than 1.1 million bpd of refined products while exporting crude oil, the impact on demand for shipping could be enormous.

“There is a major downward correction expected once operations approach full capacity. Assuming that most Nigerian crude oil will be refined domestically, trade flows to Europe and Asia will decline fast, with a significant gap to be filled, most probably by additional volumes coming from American suppliers, including the US and emerging South American producers such as Brazil, Colombia and Guyana,” it said.

The CBN governor, who commended Dangote after the tour of the project on Saturday, said the refiner would not only satisfy local consumption but also position Nigeria as a major exporter of petroleum products.

“It will serve almost the whole of Africa. This project is so strategically positioned that it will even make the final price of fuel within and outside Nigeria to be lower than those imported from other parts of the world,” he added.

 

Source: Punch

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