Dangote Refinery has increased its supply of imported crude oil from the United States, with a second cargo departing American waters for Nigeria on Friday.
According to ship tracking data, another shipment of US light sweet crude oil was en route to Nigeria on Friday for delivery to Dangote Refinery.
Reuters reported that Vessel Otis, which loaded approximately 850,000 barrels of WTI Midland in Houston last week, was signaling Lekki in Nigeria as its destination, according to Kpler and LSEG ship tracking.
The vessel was expected to arrive in the country around mid-March.
The first shipment of two million barrels of US crude aboard the very large crude carrier, Gem No. 1, chartered by Vitol, is nearing Nigeria and is anticipated to discharge next week.
Situated on a peninsula on the outskirts of the commercial capital, Lagos, Africa’s largest refinery boasts a nameplate capacity of 650,000 barrels per day.
This refinery was constructed by the continent’s wealthiest individual, Aliko Dangote.
Since December last year, the refinery has been procuring crude, with The Nigerian National Petroleum Corporation Ltd (NNPCL) acting as the primary supplier.
Recently, the refinery also issued tenders to sell two fuel cargoes for export, according to a tender document and trading sources familiar with the matter who spoke to Reuters earlier this month.
In January this year, Bloomberg reported that Trafigura Group had sold two million barrels of WTI Midland to Dangote Refinery for end-February delivery.
It marked the first instance of the giant refinery purchasing non-Nigerian crude.
Trafigura, a multinational commodity trading company headquartered in Singapore, operates major hubs in various locations, including Geneva, Houston, Montevideo, and Mumbai.
The group is actively involved in the oil and petroleum products market.
The Rationale Behind Importing US Oil
The recent initiative by the Dangote Refinery to import crude oil from external suppliers has sparked both curiosity and debate. As Nigeria’s largest refinery project, this strategic choice warrants closer examination. Is it a prudent business move or a potential pitfall, given Nigerian is Africa’s largest oil producing nation.
The refinery’s decision could be rooted in economics. West Texas Intermediate (WTI) Midland barrels from the US tend to be more competitively priced than Nigerian crude grades linked to Brent. In a fiercely competitive global market, cost optimisation is essential for sustained profitability.
The rise of US oil production has also disrupted traditional supply dynamics. Nigeria, despite its oil wealth, faces stiff competition. By diversifying its sources, the Dangote Refinery aims to navigate market fluctuations and secure a reliable supply.
Importing external oil provides flexibility. It allows the refinery to adapt swiftly to changing demand, quality variations, and geopolitical shifts. In an unpredictable energy landscape, versatility is an asset.
Nigeria’s economy heavily relies on oil exports. While importing oil isn’t inherently negative, it raises questions about self-sufficiency. The nation must simultaneously bolster domestic production to mitigate reliance on imports.
Local Impact – Balancing Act
The decision affects local oil producers. Supporting indigenous production is crucial for Nigeria’s economic growth, job creation, and energy security. Striking the right balance between imports and domestic output is paramount.
The Refinery’s move could also align with Nigeria’s broader energy strategy. Sustainable development necessitates a holistic approach that considers environmental impact, technological advancements and diversification beyond oil.