Dangote’s refined product hits European market, seeks US crude oil

In a groundbreaking move, Dangote refinery, the largest in Africa, has started the exportation of its refined products, opening up additional revenue streams for the massive refinery.

According to data from trade analytics firm Kpler, a shipment of Low-Sulphur Straight Run Fuel Oil (LSSR) produced at the 650,000 barrels per day facility has made its way to the European market.

Data obtained revealed that the 90,000-ton cargo was loaded at Dangote’s terminal in Lekki on April 25 and discharged in Rotterdam on May 13.

Market participants anticipate that the cargo will likely be utilised as a blendstock to produce very-low sulphur fuel oil (VLSFO).

Approximately 72pc of the fuel oil exported from Dangote has found its way to the US since the refinery initiated its first LSSR export tender in mid-February. The total delivery so far stands just shy of 620,000 tons.

According to trade analytics firm Vortexa, another LSSR shipment totaling 83,400 tons left the refinery on May 7. It is slated to arrive in France on May 22, although market participants speculate that this may not be its final destination.

The price assessments for LSSR, based on a fob Amsterdam-Rotterdam-Antwerp (ARA) basis, have remained at a $5 per barrel premium to front-month Ice Brent crude futures this week. This marks a narrowing from an 18-month high of $7.50 per barrel in mid-April.

Maintenance work, which commenced in the first quarter, has impacted fluid catalytic cracking (FCC) units at several refineries. These FCCs play a crucial role in utilising LSSR and low-sulphur vacuum gasoil to augment gasoline yields.

Earlier, BusinessDay reported that the Dangote refinery has initiated a new order for crude oil amounting to approximately 24 million barrels over the upcoming twelve months.

In an effort to boost processing rates, the refinery is in the process of procuring millions of barrels of US crude within the next year, signalling a potential strain on Nigeria’s current output to sustain its operations.

According to a document seen by Bloomberg, the Dangote refinery issued a term tender for the purchase of 2 million barrels per month of West Texas Intermediate Midland crude for 12 months starting in July. The tender is set to close on May 21st.

This call for US oil highlights the refinery’s significant role in global crude and fuel trading and reflects Nigeria’s ongoing struggle to boost its own crude production. In aditional, it demonstrates Dangote’s willingness to explore cheaper supplies abroad rather than relying solely on domestic sources.

Elitsa Georgieva, executive director at Citac, an energy consultancy specialising in the African downstream sector, commented, “Supply of Nigerian crude is insufficient or unavailable and sometimes unreliable. WTI, on the other hand, is available, with reliable supply and competitively priced.”

Georgieva further emphasised that procuring different feedstocks offers flexibility and optionality for the refinery, making the tender economically viable for Dangote.

To ensure an adequate local supply for the massive 650,000 barrel-per-day Dangote refinery, the Nigeria Upstream Petroleum Regulatory Commission released new draft rules last month that will mandate oil producers to sell crude to domestic refineries.

Currently operating at approximately half capacity, the refinery is leveraging cheaper US oil imports for up to a third of its feedstock. Since the beginning of the year, it has received at least one supertanker carrying about two million barrels of WTI Midland each month. An official at Dangote declined to comment.