Dangote Refinery displaces European, Russian exports in West African markets

Key Points

• Dangote Refinery is significantly increasing diesel exports to West Africa, taking market share from European and Russian suppliers.
• Diesel exports reached nearly 100,000 barrels per day (bpd) in May, mainly targeting other West African countries.
• EU, UK, and Russian diesel exports to West Africa hit multi-year lows due to Dangote’s competition.
• The refinery is allegedly currently producing and selling gasoil with higher sulphur content, exceeding the 50 ppm limit set by Nigerian regulations, due to delayed unit restarts.

 

Nigeria’s new Dangote oil refinery is significantly increasing its diesel exports to West Africa, thereby capturing market share from European refiners, according to traders and shipping data.

The $20 billion refinery, constructed by Africa’s richest man, Aliko Dangote, in the Lekki area of Lagos, is currently producing a lower grade of diesel than anticipated, according to a report by Reuters.

This is owing to the pending restart of units required to produce cleaner fuels, leading the refinery to seek buyers in neighbouring markets.

Surge in Exports

In May, the refinery’s gasoil exports nearly doubled from April, reaching almost 100,000 barrels per day (bpd), as per data from analytics firm Kpler. Most of these exports were directed to other West African countries, although one cargo was shipped to Spain.

Also read: Dangote accuses international oil companies of sabotaging refinery operations

However, preliminary data for June indicated a sharp decline in gasoil volumes. Despite this, overall oil product exports, including fuel oil, naphtha, and jet fuel, remained relatively high at 225,000 bpd.

Market Impact

A European distillates trading source noted that the refinery has “changed the balances in West Africa,” impacting European markets as a result. Data from Kpler revealed that EU and UK gasoil exports to West Africa fell to a four-year low of 29,000 bpd in May, while Russian exports to the region dropped to an eight-month low of 87,000 bpd.

Compliance and Controversy

The Dangote refinery has also been selling high-sulphur diesel in the Nigerian market but is embroiled in a dispute with local fuel retailers over the sale of dirtier fuel.

Also read: Dangote Refinery, fuel marketers trade words over dirty fuel allegations

Nigeria’s oil law, passed in 2021, mandates a sulphur content of 50 parts per million (ppm), aligning with the sub-regional ECOWAS standards adopted in 2020. However, the regulator permitted the sale of gasoil above 200 ppm locally from the beginning of the year until June, to give local refineries and importers more time to comply with the new standard.

Future Prospects

As European countries, including major hubs like Belgium and the Netherlands, tighten regulations on high-sulphur gasoil exports, the Dangote refinery’s cargoes have found markets in regions with more lenient motor fuel standards.

A trading source with knowledge of the specifications stated that the refinery has been producing and exporting diesel with a sulphur content of 800-1,300 ppm, significantly above the 200 ppm limit.

Also read: Access to Domestic Crude Oil: Dangote Refinery Should Be Treated as a National Asset  Dr. Ogho Okiti

Despite these challenges, the company is on track to meet stricter standards soon.

“We have commissioned the equipment, and it will be done within two weeks,” said Devakumar Edwin, an executive at the Dangote Refinery.

In a statement last week, Dangote confirmed that they are gradually working towards meeting the new standard.

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