Adds comments on possible fuel distributors in paragraphs 9-11
Nigeria's 650,000 b/d Dangote refinery has started production, and diesel and jet fuel will hit the market this month pending regulatory approvals, the company's president Aliko Dangote said.
The company previously suggested that the refinery is starting operations at around half of its capacity. At full capacity it will produce about 2.28mn t/month of oil products, including 875,000 t/month of diesel and 200,000 t/month of jet fuel.
Dangote Group has said the refinery aims to end Nigeria's dependence on refined products imports, and it will leverage its flexibility to switch middle-distillates output between jet and kerosene and from jet/kerosene to diesel. The company anticipates Nigerian demand at 350,000 t/month for diesel and 60,000 t/month for jet/kerosene. This leaves a potential 525,000 t/month of diesel and 140,000 t/month of jet/kerosene for export.
As part of its export strategy, Dangote said its products will conform to Euro V specifications and its operations to US EPA, European and World Bank emission and effluent norms. But with the refinery's crude distillation unit (CDU) apparently the sole production unit currently operational, according to a trader, middle distillate output is unlikely to match Euro V specifications as runs would not be desulphurised by secondary units.
For now, higher sulphur diesel and gasoil exports could find buyers in west African markets where import specifications are less strict. Cargoes delivered to offshore Lome, Togo, carrying 3,000ppm sulphur gasoil are valued around a premium of $45/t against front-month Ice February gasoil futures, according to market participants. Oil product exports from Dangote are likely to begin within the following two weeks, they said.
No middle distillate loadings have been recorded at southern Nigerian ports since the final scheduled crude batch was delivered to Dangote on 8 January, according to Vortexa tracking data. Product loadings could be made through three of the refinery's single point moorings (SPMs) instead of at the refinery's nearby port of Lekki.
Dangote Group anticipates strong competition, projecting a 2024 global product demand growth of 1mn b/d. This is only around 57pc of its forecast for 2024 new global refining capacity, which the company estimates will total 1.75mn b/d. Dangote anticipates competition in new refining capacity from China's 400,000 b/d Yulong, the 340,000 b/d Dos Bocas in Mexico, Oman's 230,000 b/d Duqm and the 267,000 b/d Sitra in Bahrain.
Dangote Group's commercial production of propane, gasoline and polypropylene will follow, although the firm did not provide a timeline. It expects output, at full capacity, of 25,000 t/month for propane, 1.1mn t/month for gasoline and 75,000t/month for polypropylene. Dangote Group projects it will have no propane available for export but expects to export 100,000 t/month and 55,000 t/month of gasoline and polypropylene, respectively.
Seven Major Oil Marketers Association of Nigeria members are poised to distribute refined oil products from the Dangote refinery, according to a post made by the office of the special advisor to the president on X, formerly Twitter. The companies 11 PLC, Ardova, Conoil, MRS Oil Nigeria, NNPC Retail, OVH Energy Marketing and Total Nigeria are due to act as fuel distributors upon completion of commercial terms.
The Independent Petroleum Marketers Association of Nigeria will explore loading product from the refinery, and the Petroleum Products Retail Outlets Owners Association of Nigeria has already engaged in discussions with the Dangote on the supply of products from the site.
