Faith Nyasuguta
The Dangote refinery has reportedly returned to importing crude oil from the United States, just three months after committing to sourcing its crude exclusively from Nigeria. This decision highlights the persistent challenges in securing a stable supply of Nigerian crude oil.
Initially, the refinery procured crude from international markets to refine Premium Motor Spirits (PMS), commonly referred to as petrol. This reliance on foreign sources was due to logistical and financial obstacles in accessing Nigerian crude, which was sold in dollars. These complications made it difficult for the refinery to depend solely on local crude.
In October, the Nigerian government introduced a policy allowing the Dangote refinery to purchase crude in the local currency, the naira. This shift was expected to enable the refinery to source up to 400,000 barrels per day of Nigerian crude without resorting to international imports. The policy was seen as a significant move to streamline operations and reduce reliance on foreign crude.
However, recent reports from Bloomberg reveal that the refinery has resumed importing crude from the US. Anonymous sources disclosed that the refinery acquired around two million barrels of WTI Midland crude from Chevron Corp., with delivery expected within a month. This development signals that challenges persist in securing consistent supplies of Nigerian crude despite the currency policy change.
Earlier this year, the refinery relied on one or two supertankers of US crude monthly, supplementing its domestic inventory. However, during the summer, these shipments decreased as the refinery increased its intake of Nigerian crude. The agreement to pay for Nigerian crude in naira was viewed as a significant step toward bolstering local production and refining capacity.
Yet, the recent transaction involving US crude indicates a need to diversify sources to maintain a stable supply. Bloomberg data shows that Chevron reserved the supertanker Azure Nova to transport petroleum from the US Gulf to the Dangote refinery last December, signaling ongoing efforts to balance supply channels.
The decision to import US crude highlights the complexities of global oil markets and the operational challenges faced by African refineries. While the Nigerian government’s move to facilitate local purchases was a positive step, underlying logistical and financial issues remain unresolved.
The Dangote refinery is set to be Africa’s largest and a critical player in Nigeria’s energy sector. Its operations significantly influence Nigeria’s ability to meet domestic fuel demands and reduce dependence on imported refined products. However, its ability to secure a reliable and cost-effective supply of crude will be essential to achieving these goals.
This situation illustrates the difficulties in aligning local oil policies with operational realities. While the refinery has made strides in boosting local refining capacity, the need for a flexible and strategic approach to crude sourcing is evident.
The Dangote refinery’s return to importing US crude reflects the ongoing struggles in securing stable supplies of Nigerian crude. As the refinery balances domestic and international sourcing, its ability to address logistical and financial challenges will determine its long-term success and impact on Nigeria’s energy security.
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