Africa’s largest oil refining plant, Dangote Refinery, is reportedly reselling cargoes of U.S. and Nigerian crude, according to sources familiar with the matter, who claim that the reoffer is linked to technical problems at the refinery.
A Dangote executive has denied these claims, insisting that the crude distillation unit (CDU) is operational. Nevertheless, the market is buzzing with speculation about what these moves mean for the refinery and its ambitions.
The Dangote Oil Refinery, a $20 billion project by Africa’s richest man, Aliko Dangote, began production in January 2024. It was heralded as a game-changer for Nigeria’s oil industry, promising to transform the country from a heavy importer of fuel to a significant exporter.
Once fully operational, it is expected to be the largest refinery in Africa and Europe, with a capacity of 650,000 barrels per day. This would have a profound impact on the Europe-to-Africa fuel trade, potentially making Nigeria a major player in the global oil market.
However, the report of reselling crude has cast a shadow over these lofty ambitions. Sources cited by Reuters said that the refinery has been offering Nigerian Escravos and Forcados crude, as well as U.S. WTI Midland crude, back on the market. Such resales are rare but not unheard of in the industry, often indicating operational challenges.
The news led to a dip in crude prices, with Brent crude falling as much as 2.5% towards $80 a barrel before recovering slightly.
However, the refinery has denied the report, with Anthony Chiejina, Chief Branding and Communication Officer at Dangote Group, calling it “outright falsehood.”
He stated, “We are not authorized to sell any crude we buy from Nigeria! Also, our CDU is working and in perfect condition. We advise that you ignore these false narratives being peddled by those bent on the importation of dirty fuels into the country.”
Yet, this denial hasn’t quelled the concerns. The refinery’s alleged resales come amidst a backdrop of tension between Dangote Group and Nigerian oil regulatory agencies.
The controversy erupted on July 18 when Farouk Ahmed, Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), claimed that local refineries, including the Dangote Refinery, were producing inferior products compared to imports.
In response to the allegations, Dangote presented evidence of rigorous testing conducted at his refinery, asserting that the quality of the refinery’s products is one of the best.
Consequently, the entrepreneur claimed that some personnel of the Nigerian National Petroleum Company (NNPC), along with certain oil traders, have set up a blending plant in Malta. Dangote made this disclosure during a hearing at the House of Representatives, where he vowed to fight these alleged underhanded practices head-on.
“Some of the NNPC people and some of the traders have opened a blending plant somewhere off Malta. We all know these areas, we know what they’re doing. It’s not that we don’t know… I’m not scared, I will fight head-on,” he said.
This allegation is significant because it suggests that certain elements within the NNPC are undermining the refinery’s operations by diverting crude supplies. An oil blending plant, which combines re-refined oil with additives to create finished lubricant products, lacks the refining capability of a full-scale refinery. The implication is that this plant is used to create lower-grade products imported into Nigeria at cheaper costs.
Mele Kyari, the Group Chief Executive Officer of NNPC, has denied these claims, stating, “To clarify the allegations regarding the blending plant, I do not own or operate any business directly or by proxy anywhere in the world with the exception of a local mini Agric venture. Neither am I aware of any employee of the NNPC, that owns or operates a blending plant in Malta or anywhere else in the world.”
Kyari further assured that any NNPC staff found to be involved in such activities would face strict sanctions. “For further assurance, our compliance sanction grid shall apply to any NNPC employee who is established to be involved in doing so if availed and I strongly recommend that such individuals be declared public and be made known to relevant government security agencies for necessary actions in view of the grave implications for national energy security,” he concluded.
The allegations and the subsequent denials have created a complex and charged atmosphere. If the claims about the reselling of crude are true, it could indicate that Dangote is backing down from the ambitious refinery, despite his vow to fight on.
However, the refinery’s operational hiccups, real or perceived, have broader implications for Nigeria’s oil sector. The country has long struggled with refining capacity, relying heavily on imports despite being Africa’s largest oil producer.
Dangote Refinery was supposed to be a solution to this paradox, but these recent issues suggest that the path to self-sufficiency in fuel production may be fraught with more challenges than initially anticipated.
Like this:
Like Loading...
