Dangote Refinery fuels Nigeria after 28-year lull

NNPC buys at N898/litre, supplies 48.6m barrels of crude

Refinery eyes 100% delivery via sea

It was a historic moment in Nigeria’s energy sector on Sunday as premium motor spirit refined at the Dangote Petroleum Refinery started hitting filling stations nationwide.

This marks the first time in nearly three decades that a significant portion of Nigeria’s PMS needs will be met domestically.

Nigeria has failed to put its four refineries to work despite spending millions of dollars on turnaround maintenance.

But things are about to change as the $20 billion refinery, built by Nigerian billionaire Aliko Dangote in Lagos, has started fuelling Africa’s biggest oil producer, which has experienced scarcity of PMS, also known as petrol, in nearly two months.

Read also: Dangote Refinery denies selling petrol at N898/litre to NNPC

The refinery began processing petrol last week, but disagreements over off-take rights and pricing had delayed distribution.

“NNPC Trading Limited will continue to import a shortfall of 15 million litres to meet Nigeria’s daily demand for petrol estimated at 40-50 million litres a day,” a source in the downstream sector said.

He added, “Each marketer will take a maximum of 50 trucks daily.”

BusinessDay findings showed the $20bn Lekki-based facility is equipped with 86 gantries, making it possible to load 86 trucks simultaneously.

At the start of the process, the Nigerian Television Authority reported that 10 trucks drove into gantries while the refinery’s compartments were filled with petrol from a computerised gadget.

The loading of the Dangote petrol signifies an end to the month-long debate over the quality and sale of the product.

Abubakar Maigandi, national president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), told BusinessDay that although there are still uncertainties regarding the price that marketers will buy from NNPC, the coming of the Dangote Refinery is a welcome development.

“With the refinery, we will not be having issues of scarcity, which often results from logistics challenges, because it is produced within the country and the high cost of importation will no longer be there,” Maigandi said.

Pricing problem

However, the NNPC said on Sunday that it purchased PMS, commonly known as petrol, from the Dangote Refinery at a rate of N898 per litre.

This revelation comes amidst growing anticipation about the impact of the refinery’s operations on fuel prices in Nigeria.

Olufemi Soneye, a spokesman for NNPC, disclosed the price during an interview with a local news outlet.

“We successfully loaded PMS at the Dangote Refinery today,” he stated. “The claim that we purchased it at N760 per liter is incorrect. For this initial loading, the price from the refinery was N898 per liter,” Soneye said.

Sea transport plan

Devakumar Edwin, chief executive officer of Dangote Refinery, told Arise TV on Sunday that there is an ambitious plan to transition entirely to sea transportation for its operations.

According to Edwin, the move is part of a broader strategy to optimise logistics and reduce costs.
Read also: Petrol from Dangote refinery will only be sold to NNPC, FG insists

“Using sea transport will minimise transport costs and ultimately reduce costs for consumers. We have facilities for export by both ship and road,” he said.

He added, “Seventy- five percent of production can be transported by sea, and we are working to increase this to 100 percent.”

Chinedu Ukadike, national publicity secretary of IPMAN expressed his members’ readiness to purchase all petrol refined from the Dangote Refinery.

“We are not against NNPC being the sole off-taker of Dangote Refinery’s PMS. They invested in the refinery and should have the offer of first refusal. However, selling directly to IPMAN will reduce the final cost on consumers as it will eradicate distribution roundtripping,” Ukadike said.

As part of the agreement, BusinessDay’s findings showed the refinery would supply petrol and diesel of equivalent value to the domestic market, also to be paid in Naira.

Diesel is expected to be sold in naira by the refinery to any interested off-taker, while petrol will only be sold to NNPC for distribution to various oil marketers.

For Etulan Adu, an international oil and gas analyst familiar with the Nigerian market, the pump price will depend on the pricing mechanism adopted by the NNPC.

He added, “NNPC has the first right to be the sole buyer, but for a fair market, it shouldn’t be so. Price control and market dominance in the downstream sector is what NNPC is holding onto; the government wants to control the market.

“Remember crude supply to Dangote Refinery by NNPCL is critical to sustainable fuel supply based on naira basis. Exchange rate volatility would affect the pricing mechanism if NNPCL doesn’t fix an exchange rate in Naira for crude supplies.”

Data seen by BusinessDay showed that NNPC has supplied 48.6 million barrels of crude oil to the Dangote Refinery since December 2023.

A breakdown showed the highest volume of crude oil provided to the refinery occurred in June and July 2024, with 5,108,050 barrels each month. The lowest volume was recorded in March 2024, at 3,290,723 barrels.

As of September 2024, the total cumulative volume of crude oil loaded to the Dangote Refinery since December 2023 is 48,622,741 barrels. The NNPC has indicated that the refinery is expected to receive an additional 11,715,000 barrels of crude oil in October 2024.

Chinedu Onyegbula, an energy expert, told BusinessDay that the coming on board of Dangote Refinery should lead to a marginal reduction in the price of PMS.

He however noted the possible challenge may arise from managing the logistics and lack of patronage from marketers who are insisting that the price is not competitive enough.

“The biggest challenge would be managing the logistics of the process and the challenge for Dangote refinery on the lack of patronage from marketers who are insisting that the price is not competitive enough,” he said.

European refinery to cease operations as Dangote begins

As the Dangote Refinery ramps up production, the Grangemouth refinery, Scotland’s only crude processing facility, is set to close in the second quarter of 2025, its owners confirmed, as the refinery has been struggling to compete with the new complex facilities in Asia, Africa, and the Middle East.

The Grangemouth refinery, which was opened by the predecessor of BP in 1924, expanded its production into petrochemicals in the 1950s.

However, the facility with a refining capacity of 150,000 barrels per day (bpd) has been unable to compete with the massive new refineries that major oil firms and refiners have built in Asia and the Middle East in recent years.

The refinery’s owner, Petroineos, a joint venture between PetroChina and INEOS, on Saturday, announced its intention to cease refinery operations at Grangemouth and transition the site to a finished fuels import terminal and distribution hub during the second quarter of 2025, subject to consultation with employees.

The closure of the refinery will result in 400 job losses as the number of employees at the site will be cut to 75 from 475.

The conversion of the site to a fuel import terminal would “safeguard fuel supply for Scotland” but this terminal would need fewer than 100 employees, according to the company.

Some major oil firms, including Shell and Eni, have recently announced they would convert refineries in Europe to meet demand for base oil and biofuels.