Nigeria's Dangote diesel offers cut local prices

Nigeria's 650,000 b/d Dangote refinery has offered road diesel at the lowest price since it began distillate sales earlier this month, and market participants said this is likely to weigh heavily on local values and import markets.

The refinery dropped prices for diesel, known in Nigeria as automotive gasoil (AGO), to 1,000 naira/litre (87¢/l) for a minimum of 1mn l, and offered a discount of N30/l for offtake of 5mn l and above, it said. The price changes took effect today.

The N1,000/l offer equates to around $950/t for product that market participants say contains 700ppm sulphur. The move by Dangote was labelled as "very aggressive pricing" by a trader, while other sources said it "crashed the market". Local marketing companies were offering AGO at as low as N1,140/l ex-depot by the close on 16 April, according to a source, while Dangote was offering at N1,210/l.

Dangote began offering AGO at around N1,200/l three weeks ago, which was a 30pc reduction from the then market levels of around N1,600/l, the company said today. The Major Energies Marketers Association of Nigeria (MEMAN) assessed ex-depot prices at the Apapa Hub in Lagos at N1,396/l on 29 February.

Output from Dangote is altering Nigeria's import structures, with local high sulphur gasoil buyers captive to the refinery's supply. The refinery operator has secured an exemption from Nigeria's 200ppm sulphur product import cap, allowing it to supply its 700ppm sulphur product locally.

The high sulphur gasoil offshore Lome ship to ship (STS) market was described by a market participant today as "almost dead". No bid or offer levels for 10,000-20,000t STS transfers were reported today. The most competitive offer was at a premium of $25/t against Ice May gasoil futures, for loading between the last week of April and the first week of May.

Dangote refinery began selling diesel and jet to the domestic market earlier this month. A spokesman told Argus then that Nigerian product marketing companies began loading diesel and jet from the refinery onto 30t trucks and minimum 22,000t tankers. Around 70-80pc of truck loadings from the refinery are destined for areas of the country outside Lagos, according to a market participant.

Dangote said today it had loaded diesel onto the 35,000 dwt tanker Golden Lavender, which appeared to make the first domestic seaborne delivery of Dangote-origin diesel and jet since the refinery started middle-distillate production, discharging on 10 April at Tincan Island, Lagos, according to Kpler.

Dangote's jet output may not yet be fit for use in aviation, according to a source who said it may currently be used as dual-purpose kerosine for power and heat generation.

By George Maher-Bonnett