Dangote Refinery begins production of petrol in Nigeria for the First Time in 28 Years
Dangote Refinery located in Lagos has just concluded the test production of Premium Motor Spirit (PMS) also known as petrol. This means that Nigeria has commenced the production of petrol for the first time in the last 28 years, THISDAY reports that the 650,000 barrels per day and will begin sale immediately.
This will bring much needed relief to Nigerians currently experiencing excruciation petrol scarcity in towns and cities across the country.
It was gathered that all the parameters for certifying the suitability of any refining asset have been satisfactorily ticked by the superstructure owned by Africa’s richest person, Mr Aliko Dangote.
The country despite spending billions of dollars on turnaround maintenance of its four official refineries for over two decades has been unable to get them to work.
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Nigeria which consumes about 66 million litres of petrol daily on the average, currently spends a huge chunk of its budget, exceeding $10 billion by some estimates on the importation of the road fuel every year.
The development is expected to save the country several billions of dollars in foreign exchange as well as enhance the local availability of the critical fuel heavily used by businesses and homes.
In the same vein, Africa’s largest oil refining facility, is on the brink of producing significant volumes of petrol and the fuel could be made available as early as this week, Bloomberg reported yesterday.
Describing it as a landmark moment with the potential to transform the global market for the fuel, the report quoting two sources, stated that that product testing has started in earnest.
The giant new facility near the commercial hub of Lagos is on the verge of producing large amounts of the fuel and will be able to process 650,000 barrels a day of oil when at full capacity, turning more than half of that into petrol.
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, Bloomberg stressed.
Dangote’s production is expected to impact billions of dollars of trade in fuel markets regionally and beyond as Nigeria remains a global demand sink for the fuel, receiving almost 250,000 barrels a day in shipments last year, mostly from Europe, according to data from analytics firm Vortexa Ltd.
Key to the plant’s petrol output is a unit called a reformer, which produces blendstock for the road fuel. That has started operating, with petrol production expected to begin by the end of the week, one of the people told the international news agency. Another said petrol would be rolled out this week.
At full rates, the refinery is expected to be able to produce about 330,000 barrels a day of petrol, according to Randy Hurburun, senior refinery analyst at consultancy Energy Aspects Ltd. That’s more than 1 per cent of global demand for the road fuel, which is about 27 million barrels a day.
Still, those 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.
The refinery has been gradually ramping up after years of delays. The plant’s owner, Aliko Dangote, said in July the plant was aiming to start petrol production from August.
In response to questions about the various steps involved in ramping up gasoline output, a spokesman for Dangote told Bloomberg “we are on track”.
In the same vein, a Reuters report said yesterday that the refinery had begun processing petrol after delays caused by recent crude shortages, quoting an executive of the company.
The $20 billion refinery began operations in January with output of products including naphtha and jet fuel. The refinery promises to ease oil producer Nigeria’s costly reliance on imported oil products.
“We are testing the product (petrol) and subsequently it will start flowing into the product tanks,” said Devakumar Edwin, a vice president at Dangote Industries Limited. He did not however say exactly when the petrol would hit the local market.
Edwin said state-oil firm, the Nigerian National Petroleum Company Limited (NNPC), Nigeria’s sole importer of petrol, would buy the product exclusively.
“If no one is buying it, we will export it as we have been exporting our aviation jet fuel and diesel,” Edwin said.
The delivery of petrol into the Nigerian market will ease NNPC’s struggle to supply the local market. The company is reeling with debts of $6 billion to oil traders for supply since January, Reuters reported.
This has affected its ability to supply the local market where fuel queues have persisted since July.
“The news that Dangote is processing gasoline (petrol) couldn’t come at a more crucial time given NNPC’s statement about its difficulties securing imported supply due to financial strain,” said Clementine Wallop, Director, Sub-Saharan Africa at political risk consultancy Horizon Engage.
She said this “prompts the question of how NNPC will manage purchasing from Dangote, and impresses the need for greater transparency in its finances”.
Nigeria is Africa’s top oil producer yet it imports almost all its fuel due to years of neglect of its national refineries.
Meanwhile, a Reuters survey has indicated that the Organisation of Petroleum Exporting Countries (OPEC) oil output fell in August to its lowest since January, as unrest that disrupted Libyan supply added to the impact of ongoing voluntary supply cuts by other members and the wider OPEC+ alliance.
“Among countries posting higher output, there was a small increase in Nigeria which boosted exports,” the survey found.
OPEC pumped 26.36 million barrels per day last month, down 340,000 bpd from July, the survey found. This was the lowest total since January 2024, according to the survey.
A drop in Libyan exports and production amid a standoff between political factions over control of the central bank has helped boost oil prices and, sources say, increased the prospect that OPEC+ will proceed with a planned output hike from October.
Libya provided the largest supply loss last month of 290,000 bpd, the survey found. Output was disrupted at the Sharara field early in the month and at more fields towards the end, trimming output to an average of 900,000 bpd, the survey found.
Some flows data, such as that of Kpler, showed little impact on Libyan exports in August, although sources in the survey estimated the production impact to be more significant.
Libya is exempt from OPEC+ agreements to limit production. Other declines came from Iraq, which lowered exports in August according to the survey and is seeking to boost compliance with its OPEC target, and from Iran which is also exempt.
Iran has been boosting exports in the last few years despite US sanctions remaining in place and is still pumping close to the highest levels since 2018.
OPEC pumped about 220,000 bpd more than the implied target for the nine members covered by supply cut agreements, with Iraq still accounting for the bulk of the excess, the survey found.
THISDAY
