With Inadequate Local Supply, Dangote Buys More Foreign Oil

•Ramps up refining activities, takes delivery of over 3m barrels in March

Emmanuel Addeh in Abuja

Nigeria’s Dangote refinery is increasing its processing rates, taking delivery of over 3 million barrels of American crude and other international shipments in March, in addition to domestic deliveries, as local crude sales become increasingly inadequate.

The refinery, which has yet to reach full capacity, is expected to continue importing crude from various sources, including the Atlantic basin, based on price competitiveness, Bloomberg reported yesterday.

At full capacity, the refinery could process 650,000 barrels a day, making it the largest oil refinery in Africa, and has already reduced Nigeria’s fuel imports and glut of Nigerian crude, the report said.

Nigeria’s Dangote refinery is drawing feedstock from across the world to add to its domestic deliveries as the mega-plant gradually ramps up, altering the region’s import and export outlook.

It has taken delivery of more than 3 million barrels of American crude since the start of the month. The refinery has also made purchases closer home, importing a shipment of Angola’s Pazflor grade and a cargo of Algeria’s Saharan Blend from Glencore Plc in recent weeks.

The giant facility near Lagos has been boosting processing rates since it started up early last year but has yet to reach full capacity. Still, run rates appear to be increasing so far this month, according to an analyst at Energy Aspects Ltd.

“Crude deliveries in the last two weeks have averaged 450,000 barrels a day, and our satellite monitoring shows a recent draw in crude stocks at the refinery, indicating runs are likely on the rise,” said Randy Hurburun, senior refinery analyst at the consultancy. The researcher estimates that runs averaged 380,000 barrels per day over January and February.

At full tilt, Dangote could run at 650,000 barrels a day, making it the largest oil refinery in Africa by far and dwarfing any of Europe’s plants. The refinery has already trimmed a glut of Nigerian crude and transformed the nation’s fuel imports.

Dangote refinery is importing crude oil from the US, Angola and Algeria, tanker-tracking data compiled by Bloomberg said. A spokesman for Dangote didn’t immediately respond to a request for comment, Bloomberg said.

Even as overseas purchases are increasing, the refinery runs mostly on local feedstock, taking in more than 10 million barrels of Nigerian crude last month, according to tanker-tracking data compiled by Bloomberg.

The Nigerian government is in talks with Dangote to extend a contract to sell it crude in the local currency. The Nigerian National Petroleum Company Limited (NNPC) said it has supplied 48 million barrels since the agreement started in October.

“Ultimately, price competitiveness will continue to be the dominant factor in deciding Dangote’s crude imports,” said Ronan Hodgson, a London-based analyst at FGE. “WTI will continue to be an attractive grade for the refinery because of its light-sweet nature and price competitiveness with local West Africa grades,” he said.

Other Atlantic basin grades like Libya’s Sharara and Es Sider and the North Sea’s Oseberg, Ekofisk and Troll could all be contenders at the right price, according to Energy Aspects’ Hurburun.

“The Atlantic basin has many viable alternatives for them to turn to, including from the Mediterranean and North Sea but it all depends on the economics and terms on which they get it,” Hurburun said.