Bloomberg: Dangote Oil Refinery Increasingly Skipping US Crude for Local Supply

*Facility set to start petrol output in September, IIR says

Emmanuel Addeh in Abuja

Nigeria’s Dangote mega-refinery is taking more of the country’s own oil for processing, while inflows from the US appear to be waning, Bloomberg has reported.
The plant is set to import just over four-fifths of its feedstock from domestic sources in the third quarter, data compiled by Bloomberg showed. That compares with less than three-quarters in the prior quarter, according to tanker-tracking data and information from traders.
Oil prices were pressured last month on reports that the plant planned on re-selling some of the US barrels it previously purchased, underscoring the pivotal role Dangote already plays within Atlantic basin petroleum markets.

The refinery’s efforts to dial back overseas crude purchases potentially leave more US export barrels competing for buyers elsewhere.
The pivot could even gather pace in the coming months. From October, the Nigerian government is starting a new system in which Dangote will be able to purchase crude in the local currency. The plan could involve as much as 445,000 barrels a day of the nation’s crude.

It’s not yet certain how much supply will be traded under the system but if used to its limit, the process could leave Dangote requiring hardly any overseas crude.
The refinery — near the nation’s commercial hub Lagos — has taken in more than 56 million barrels of crude since December as it completed test runs and gradually lifted processing. Of that, 78 per cent has been local supply.
A senior Dangote official declined to comment on the refinery’s future crude-procurement plans.
It took six cargoes of crude directly from state oil company Nigerian National Petroleum Company Limited (NNPC) for next month, a company spokesman said earlier this month.

Most Nigerian cargoes are about 1 million barrels each. A further two shipments from Nigeria as well as 2 million barrels of WTI Midland are slated for September arrival, the tanker-tracking data show.
The plant will have taken in an average of almost 10 million barrels per month in the six months through September.
Inflows of American feedstock had been expected to increase significantly earlier in the summer.

However some of the US barrels it bought for this month and next were being resold, an official at Dangote Industries said in late July, according to the report. It also scrapped two tenders in which it had been looking to purchase a further 6 million barrels of American crude for September, according to traders.
The changes may also leave fewer Nigerian barrels on offer for sale into Europe and Asia.
Meanwhile, Nigeria’s 650,000-barrel-per-day Dangote refinery is undergoing test runs for petrol production, with full operation expected by mid-September, according to a note by industry monitor IIR Energy.

The $20-billion Dangote refinery, built by Africa’s richest man, Aliko Dangote, on the outskirts of Lagos, began operations in January after years of delays.
Dangote, which has so far only produced diesel and other distillate fuels, had earlier said that petrol deliveries from the refinery would start in July. Before that the refinery had aimed to start making the motor fuel by May.
It is possible that there could be further extensions, IIR said in a note to clients. Emails to Dangote were not delivered and calls did not connect, the report said.
Once fully operational, the refinery is set to upend the Europe-to-Africa fuel trade and reduce Nigeria’s reliance on imported refined products.
Also yesterday, oil prices steadied as a drop in US fuel inventories provided a floor, after four days of declines on investor concern over the global demand outlook.

Brent crude futures gained 29 cents, or 0.4 per cent, to $76.34 a barrel by 1330. US West Texas Intermediate crude futures rose 43 cents, or 0.6 per cent, to $72.36.
Prices had plunged on Wednesday as revisions to jobs data in the United States added to concerns about crude demand after weak economic data out of China last week.
The United States is the world’s biggest oil consumer and China is the world’s largest oil importer.