Nigeria: Dangote announces that its refinery will start producing crude oil in 2025

The Dangote Group, owner of Africa's largest refinery, will start producing crude oil in the first quarter of 2025. The move is designed to address the raw material supply challenges that the $20 billion refinery has faced since coming on stream.

A senior refinery official confirmed this information on Saturday in response to a report by S&P Global Commodity Insights. "Our company really is going to start producing crude oil to support the refinery, but that will start in the first quarter of 2025," said the source, wishing to remain anonymous due to the lack of authorisation to discuss the matter publicly.

Dangote Group will begin crude oil production at two upstream projects in the Niger Delta, in oil mining concessions 71 and 72. The S&P Global Commodity Insights report states that initial production will start at 20,000 barrels per day (b/d), before gradually increasing during the first quarter of 2025. The aim is to guarantee a constant supply of raw materials for the Dangote refinery, which has experienced months of crude supply difficulties.

These two concessions, located in the shallow waters of the Niger Delta, just 22 km from the Bonny terminal, have a long history of production, with discoveries dating back to 1966. However, production peaked in 1999 before declining. Today, these fields are estimated to contain nearly 300 million barrels of recoverable oil and up to 2.3 trillion cubic feet of natural gas, according to S&P.

The Dangote refinery, which comes on stream in January 2024 and has a processing capacity of 650,000 barrels per day, was built with the ambition of reducing Nigeria's dependence on imported refined petroleum products. For decades, despite its status as Africa's leading oil producer, Nigeria has been forced to import a large proportion of its refined products, due to a lack of local refining infrastructure.

Since coming on stream, the plant has produced large quantities of petroleum-based products, including petrol, diesel, gas oil, paraffin and naphtha, for both domestic consumption and export. However, crude supply difficulties have forced the refinery to import large volumes of WTI Midland oil from the United States. These massive imports highlighted the urgent need to guarantee a stable local supply of crude oil.

With the start-up of crude production by Dangote, the company hopes to reduce its dependence on foreign crude imports. The refinery absorbed nearly 200,000 barrels of Nigerian crude per day in September, according to data from S&P Global Commodities at Sea, but the Nigerian National Petroleum Corporation's (NNPC) capacity to meet all the plant's crude requirements remains limited.

The S&P Global Commodity Insights report also notes that Dangote may consider acquiring crude oil from other producers, including Libya, Senegal and Brazil, due to NNPC's limited ability to meet the refinery's entire demand. Sources close to the Dangote group warn that NNPC could only supply 60% of the plant's crude requirements, forcing the company to diversify its sources of supply.

In addition, Dangote is said to be looking for a floating production, storage and offloading vessel with a capacity of 650,000 barrels to facilitate the management of its crude oil supplies. This infrastructure would enable the refinery to secure its deliveries and improve the fluidity of its operations.

Dangote's crude oil production represents a strategic step forward for Nigeria's energy self-sufficiency. As well as meeting the country's growing energy needs, this initiative could help to reduce the cost of importing crude and refined products. Ultimately, this would reinforce Dangote's position as a key player in the Nigerian oil industry, while boosting local crude oil production.

The start-up of upstream production is also expected to have a positive economic impact, particularly in terms of job creation and government revenue. By solving crude supply problems, Dangote could also stabilise the production of petroleum products, meet domestic demand and reduce fluctuations in fuel prices in Nigeria.