Nigeria’s newly operational Dangote oil refinery is making waves in the oil industry, rapidly increasing its gasoil exports to West Africa and capturing significant market share from European refiners.
According to traders and shipping data, this $20 billion refinery is already altering the landscape of oil exports in the region.
Despite currently producing a lower grade of gasoil than anticipated, due to pending restarts of key units needed for cleaner fuel production, the refinery has been actively seeking buyers in neighboring markets.
In May, Dangote’s gasoil exports soared to nearly 100,000 barrels per day (bpd), almost doubling the levels recorded in April, as per data from analytics firm Kpler.
The majority of these exports were directed to West African countries, with one shipment reaching Spain.
However, preliminary data for June shows a significant decline in gasoil volumes. Despite this, overall oil product exports, including fuel oil, naphtha, and jet fuel, remained robust at 225,000 bpd.
The rise of Dangote’s refinery has significantly impacted European markets. A European distillates trading source told Reuters, “The refinery has shifted the balance in West Africa.”
This shift is reflected in Kpler data, which shows that EU and UK gasoil exports to West Africa fell to a four-year low of 29,000 bpd in May.
Russian exports to the region also dropped to an eight-month low of 87,000 bpd in the same month.
In Nigeria, Dangote has been selling some high-sulphur gasoil, leading to disputes with local fuel retailers over responsibility for distributing the dirtier fuel.
The Petroleum Industry Bill passed in 2021 mandates a sulphur content of 50 parts per million (ppm) to align with sub-regional ECOWAS standards.
However, the regulator allowed the sale of gasoil with sulphur content above 200 ppm locally from the beginning of the year until June, giving local refineries and importers more time to comply with the new standard.
As European countries tighten regulations on high-sulphur gasoil exports, cargoes from the Dangote refinery have found a market in regions with more lenient motor fuel standards.
This shift is crucial as European refiners face increasing constraints, while West African countries continue to demand more fuel.
Earlier in May, Aliko Dangote, the Chairman of the Dangote refinery, stated that once fully operational, the refinery would supply products to West and Central African countries due to its capacity being too large for Nigeria alone.
This expansion underscores the refinery’s potential to reduce the $17 billion in oil imports into the continent and could even lead to the closure of some European refineries.
The refinery’s impact is evident with West Africa becoming the largest regional recipient of Europe’s gasoline exports in 2023, receiving roughly one-third of the continent’s average exports, which totaled 1.33 million barrels per day (bpd).
The Dangote refinery’s rapid ascent and substantial increase in gasoil exports mark a significant shift in the oil export dynamics of West Africa, promising to reshape the region’s energy landscape for years to come.
