(Bloomberg) -- Nigeria’s giant new Dangote oil refinery is filling tanks with gasoline, a milestone for the African nation that’s been more than a decade in the making.
By the weekend, the facility near the country’s commercial hub of Lagos will be distributing gasoline, Devakumar Edwin, Dangote Industries Ltd.’s vice president for oil and gas, said by text message. The plant will be able to process 650,000 barrels a day of oil when at full capacity, and is expected to be able to turn more than half of that into gasoline.
The ramp up is likely to be welcomed within the country, given that the state oil company — Nigeria’s main importer of fuel — said its ability to supply gasoline is being disrupted by debt and rising prices.
“A lot of people have not actually believed that we will be able to deliver,” Aliko Dangote said in remarks on Arise News on Tuesday to discuss production of the fuel. “I hope this refinery will actually change the entire dynamics — not only in Nigeria but in sub-Saharan Africa.”
Dangote’s production will ultimately impact billions of dollars of trade in fuel markets regionally and beyond. Nigeria is currently a global demand sink for gasoline, receiving close to 250,000 barrels a day in imports last year, according to data from analytics firm Vortexa Ltd. The new refinery has the potential to upend long established trade routes through a massive increase in domestic production.
Key to the plant’s gasoline output is a unit called a reformer, which produces blendstock for the road fuel. That’s started operating, with gasoline production expected to begin by the end of the week, a person familiar with the matter said Monday.
At full rates, the refinery is expected to be able to produce about 330,000 barrels a day of gasoline, according to Randy Hurburun, senior refinery analyst at consultancy Energy Aspects Ltd. That’s more than 1% of global demand for the road fuel, which is about 27 million barrels a day. It’s more than enough to meet the UK’s entire requirement.
Still, those full volumes are a long way off, with Energy Aspects forecasting about 90,000 barrels a day of production in the fourth quarter, increasing to almost 250,000 in the second half of next year. Key to raising output further is another unit called a residue fluid catalytic cracker.
Long Awaited
Back in 2013, Dangote told Bloomberg that loans of $4.25 billion had been secured to build a refinery in the country that would help reduce gasoline imports. Even then, it wasn’t a new idea.
Dangote eventually announced the opening of the plant in 2023, at least seven years late, to a backdrop of skepticism about how fast it would be able to ramp up. In July of this year, he said the plant was aiming to start gasoline production from August.
“Today’s discussion is just to celebrate and to thank God almighty for bringing us to this stage of now producing gasoline,” Dangote said on Tuesday.
The refinery will blend naphtha with reformate from the reformer to make gasoline that’s suitable for the west African market, the person said Monday. It could mean millions of barrels that are currently shipped to Nigeria will need to find new homes.
“The quality of Dangote’s gasoline is not expected to be a large issue, with the refinery equipped to produce high-spec products across the barrel,” said Ronan Hodgson, energy analyst at FGE.
Nigeria’s gasoline imports fell sharply in 2023, a year that saw the removal of a fuel subsidy. While an implicit subsidy has since been reintroduced, according to a report from the International Monetary Fund, imports have not recovered.
See also: Nigeria to Compel Oil Firms to Sell Crude to Domestic Refineries
“The capacity that we have will not only meet up with Nigeria’s demand, it will meet the demand of the sub-Saharan Africa at least,” Dangote said.
--With assistance from Ruth Olurounbi and Nduka Orjinmo.
©2024 Bloomberg L.P.
