The Organisation of Petroleum Exporting Countries (OPEC) has highlighted the significant impact of Nigeria’s Dangote Refinery on the global oil market, particularly on Europe’s oil industry. According to OPEC’s June 2024 Oil Market Report, the supply of diesel and jet fuel from the Dangote Refinery is poised to disrupt Europe’s oil and gas sector, especially in Northwest Europe (NWE), a region heavily reliant on refined petroleum imports.
The Dangote Refinery, the world’s largest single-train refinery, began operations in January 2024 and has since been shaking up international crude flows. With a capacity of 650,000 barrels per day (bpd), the refinery has quickly become a key player in the global energy market. According to industry experts, the refinery’s output will not only challenge European suppliers but also have a positive impact on Nigeria’s economy.
OPEC’s report emphasises the “upside potential for higher production levels from Nigeria’s Dangote refinery,” noting that these new supplies, combined with strong flows from the Middle East and Mexico’s Olmeca refinery, are likely to exert downward pressure on NWE gasoil performance in the mid-term. This shift comes at a critical time for Europe, which has been grappling with supply challenges following the European Union’s ban on Russian diesel imports.
With Europe being one of the world’s largest purchasers of refined petroleum products, the entry of the Dangote Refinery into this market is expected to have far-reaching consequences. The refinery has already made a significant impact, with Dangote Industries Limited exporting 90 percent of its 3.5 billion liters of jet fuel and diesel to Europe. This substantial export volume is particularly notable given the alleged lack of support from the Nigerian government, which prompted the refinery to seek markets abroad.
Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, announced the company’s successful export of its first jet fuel cargo to Europe, marking a milestone in the refinery’s rapidly scaling production. The first cargo, transported by BP to Rotterdam, was part of a 120,000 metric tonnes tender awarded for the end of May, according to S&P Global.
Despite these successes, the European jet/kerosene market has experienced some fluctuations. OPEC noted that the jet/kerosene crack spread in Rotterdam against Brent saw a slight decline in June, influenced by supply-side dynamics. While there are signs of improving air travel activities, the demand for jet fuel from the aviation sector has remained subdued, impacting the product market. However, OPEC forecasts an upward trend in European jet/kerosene demand as aviation consumption levels are expected to rise in the coming months.
OPEC stated, “Going forward, European jet/kerosene demand is expected to see upward pressure as consumption levels from the aviation sector continue to pick up in the coming months.”
Aliko Dangote, President of Dangote Group, has expressed optimism about the refinery’s future, stating that the facility will broaden its feedstock sources to include crude from Libya, Angola, and Brazil. This diversification will further enhance the refinery’s competitiveness in the global market.
Nigeria, Sub-Saharan Africa’s largest oil producer, pumped 1.5 million b/d in June, according to the Platts OPEC Survey from S&P Global Commodity Insights. Until this year, all of its oil was exported due to the lack of refining capacity, with gasoline, diesel, and jet fuel imported for domestic use. However, the Dangote Refinery represents a turning point for the nation’s oil industry. With the ability to refine domestically, Nigeria can now reduce its dependence on imports, improve its trade balance, and increase its influence in the global energy market.
The Dangote Refinery is set to become a major force in the global oil industry, challenging established markets and redefining Nigeria’s role in the international energy landscape. As production ramps up and the refinery expands its reach, the world will be watching closely to see how this ambitious project reshapes the dynamics of global oil supply and demand.
Melissa Enoch
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