Researched by Industrial Info Resources -- Exporters in the U.S. and Europe will soon be sending less of their refined product to Nigeria, as the nation opens its long-anticipated Dangote Refinery in December. Nigeria's state oil company, NNPC Limited, is expected to supply Dangote with up to six cargoes of crude oil this month for test runs, according to industry insiders who spoke with Reuters.

On October 19, Industrial Info reported that the refinery's startup, originally scheduled for that month, would be delayed due to lack of supply. The NNPC announcement appears to have solved that issue.

The new refinery also will remove up to 200,000 barrels per day (BBL/d) of crude oil starting this month, an amount that could increase as the refinery, currently in test mode, ramps up to full production. Its capacity is listed at 650,000 BBL/d. If all that oil comes from NNPC, it will make a noticeable dent in the amount of crude available for export to customers, including the U.S.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Plant Database can learn more from a detailed plant profile. Industrial Info also is tracking 22 projects, worth US$13.73 billion, that are tied to the Dangote Refinery. Subscribers can click here for a list of detailed project reports.

Because the nation's three existing refineries have been largely shut in since 2020 (totaling 445,000 BBL/d of nameplate refining capacity), Nigeria since has had to rely on imports for 90% to 95% of its refined products. And all that oil--mostly categorized as light, sweet crude--needs to be exported, instead of being refined at home.

However, it will be a while before Dangote's intake or production affects markets. "Industrial Info's research indicates that the crude unit test runs and commissioning will occur well ahead of the starting of the downstream units needed to produce on spec fuels," said Hillary Stevenson, Industrial Info's Senior Director for Energy Market Intelligence, from the Argus European Crude Conference in London.

Stevenson also said the removal of barrels available for export will occur before output of gasoline and diesel ramp up, because Dangote will begin consuming crude oil several weeks before it can produce on-spec fuels.

Dangote's Effect on Import/Export Markets

U.S. crude imports from Nigeria in 2022 amounted to 38.4 million barrels, according to data from the U.S. Energy Information Administration (EIA). That's an average of 105,000 BBL/d, almost all of which is processed in Petroleum Administration for Defense District (PADD) 1, which covers the U.S. East Coast.

With an ultimate capacity of 650,000 BBL/d, full utilization of the Dangote Refinery will impact more than just the supply to PADD 1. Industrial Info will continue to monitor the situation, including the Dangote crude unit's commissioning and utilization rates.

Overall, Nigeria exported an average of 1.4 million BBL/d in 2022. That number fluctuates regularly due to theft, poor maintenance and lack of investment, among other issues. In 2023, agencies are reporting an uptick in theft, which has left exports at 30-plus-year lows.

In 2022, Nigeria's refined product import bill reached about US$28 billion, according to one expert. Nigeria's Finance Minister, Zainab Ahmed, told Reuters in May 2022 that the country's exports barely brought in enough revenue to pay the cost of importing refined products. That year, Nigeria's leadership vowed to eliminate imports by 2023, a goal that has not been reached--but will be greatly aided by the opening of the Dangote Refinery.

Over the first eight months of 2023, the U.S. dispatched a total of 633,000 barrels of gasoline to Nigeria, according to EIA figures.

NNPC Announces New Crude Grade

In related news, Industrial Info learned at the London conference that NNPC is creating a new crude blend, which it calls "Nembe Crude." The firm says this blend will be supplied from reserves of more than 2 billion barrels in the Niger Delta. Presumably, at least some of that will be included in the supply to Dangote.

NNPC aims to combat the rampant theft of oil from pipelines by "leveraging a facility known as the Nembe Crude Export Terminal, to reduce theft and tampering risks formerly faced with pipeline transport," Stevenson said. NNPC plans to ship Nembe's supply directly to Dangote and other refineries.

The terminal includes a floating production storage and offloading (FPSO) vessel with a capacity of 2 million barrels. NPPC noted that 1.9 million barrels of this blend have been loaded and delivered to date.

This crude's price is expected to be at a premium to worldwide benchmark Brent Crude. The former is believed to be rich in distillates and low in sulfur, both of which are bonuses on the world market. NNPC says its operations comply with UN COP 26 standards, making it the first national oil company committed to sustainability.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).

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