Dangote Refinery Set to Disrupt Europe’s Oil Market, OPEC Reports

The newly operational Dangote Refinery is poised to make significant waves in Europe’s oil industry, according to the latest report from the Organization of Petroleum Exporting Countries (OPEC).

The world’s largest single-train refinery, located in Lagos, Nigeria, is expected to challenge Europe’s established fuel suppliers, particularly in the Northwest Europe (NWE) gasoil market.

OPEC’s June 2024 Oil Market Report highlights the Dangote Refinery as a major new player in the global oil supply chain, with its increasing production capacity set to pressure Europe’s refined petroleum product markets.

The refinery’s output, particularly in diesel and jet fuel, could disrupt the traditional flow of these products into Europe, making it a key contender in the region’s energy sector.

“Upside potential for higher production levels from Nigeria’s Dangote Refinery, coupled with strong flows from the Middle East and new supplies from the Mexican Olmeca refinery, will likely exert pressure on NWE gasoil performance in the mid-term,” OPEC stated in its report.

The $20 billion refinery, owned by Africa’s richest man, Aliko Dangote, began operations in January 2024 and has already started to influence global oil dynamics. With a capacity of 650,000 barrels per day, the refinery’s entry into the European market is expected to alter established trade patterns and challenge the dominance of existing suppliers.

According to industry analysts at Standard & Poor Global, the Dangote Refinery’s full capacity could significantly reshape international crude markets.

“Nigeria’s $20 billion Dangote Refinery would shake up international crude flows when it reaches full capacity, having already made an impact since coming online in January,” noted the report.

In a strategic move to penetrate the European market, the refinery recently completed its first successful export of jet fuel to the continent.

Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, confirmed that more than 90 percent of the refinery’s production has been exported since the start of operations, with Europe being a key destination.

“BP is currently transporting its first jet fuel cargo to Rotterdam from Dangote, after being awarded part of a 120,000 metric tonnes tender offered for the end of May,” reported S&P Global.

Despite its promising start, the Dangote Refinery has faced challenges in securing a steady supply of crude oil, particularly from within Nigeria.

The refinery has had to rely on U.S. WTI Midland crude to supplement its operations, which has begun to tighten the global market for light, sweet crude oils such as Nigeria’s Bonny Light.

Aliko Dangote has addressed these challenges, emphasizing the refinery’s commitment to utilizing Nigerian crude as its primary feedstock.

“The refinery was built to use Nigerian crude and add value to it within Nigeria. Why should we deviate from that focus?” Dangote stated.

However, he acknowledged that the refinery remains open to sourcing crude from other regions, including Libya, Angola, and Brazil, as supply issues are resolved.

The refinery’s operations are already impacting crude flows, particularly in Europe, the largest consumer of light, sweet Nigerian crude. With the Dangote Refinery scaling up its production, European refiners may soon find themselves in a highly competitive market, driven by Nigeria’s new refining giant.