Dangote Refinery’s altering dynamics on Europe’s gasoil market gets spotlight 

Onome Amuge

Dangote Refinery’s ability to alter the dynamics of Europe’s gas and oil supply market is beginning to get major global spotlight even before it has reached its full 650,000 barrels per day feedstock production capacity. 

The Organisation of Petroleum Exporting Countries (OPEC) recently predicted that the refinery, the largest single-train refinery in the world, will have a major impact on the European oil industry, particularly in the Northwest Europe (NWE) gasoil market.

Located in Lagos, the refinery is anticipated to shake up traditional diesel and jet fuel suppliers in Europe, creating substantial pressure on the continent’s refined petroleum product market as it diversifies the sources of fuel supply and potentially alters established trade routes.

OPEC’s June 2024 Oil Market Report identified Nigeria’s Dangote Refinery as a major new player on the global stage, with potential production increases that are set to challenge the European market’s existing reliance on traditional suppliers.

The world-class refinery is expected to emerge as a significant competitor in the European market, potentially disrupting established trade patterns and supply chains as it carves out a place for itself as a major source of fuel products.

OPEC stated: “Upside potential for higher production levels from Nigeria’s Dangote refinery, coupled with strong flows from the Middle East and new supplies from the Mexican Olmeca refinery, will likely exert pressure on NWE gasoil performance in the mid-term.” 

This potential shift in the supply of gasoil occurs at a critical time for Europe, which has been facing significant challenges with its fuel supply since the EU’s ban on diesel imports from Russia took effect.

The Dangote Refinery, a $20 billion mega-project spearheaded by Aliko Dangote, Africa’s wealthiest man, has already made waves in the international oil market since its inception in January 2024. 

Dangote Refinery’s entry into the European market is poised to trigger a chain of significant changes, given that Europe is one of the world’s largest purchasers of refined petroleum products. Despite the lack of support from the Nigerian government, which reportedly drove the refinery to look for customers overseas, Dangote Industries Limited has already made a substantial impact by exporting 90 percent of its 3.5 billion litres of jet fuel and diesel to Europe.

As it continues to increase its production capacity, the refinery with a capacity of 650,000 barrels per day, is expected to further upend the global energy landscape, potentially shifting the balance of power among key players in the oil and gas industry and altering the traditional dynamics of global oil flows.

Devakumar Edwin, vice president, oil and gas at Dangote Industries Limited, recently announced the company’s accomplishment of successfully exporting its first jet fuel cargo to Europe. This maiden export, which was transported by BP to Rotterdam, was part of a larger contract of 120,000 metric tonnes awarded for the end of May, according to S&P Global.

Rasool Barouni, associate director and head of refining at S&P Global Commodity Insights, noted that the Dangote Refinery is designed to process various grades of light and medium crude oil, including Nigerian grades. Barouni also agreed that other similar grades, such as those originating from West African countries, could potentially serve as alternative feedstock for the refinery.

While the Dangote Refinery’s swift development has been impressive, it has not been without its share of challenges. Notably, the refinery faced challenges in securing sufficient crude supplies from within Nigeria, which compelled it to resort to importing U.S. WTI Midland crude in order to maintain its production levels.

Responding to the ongoing challenges in securing domestic crude for the Dangote Refinery, Aliko Dangote,  the president of Dangote Group, firmly stated that the facility was originally constructed with the intent of utilising and adding value to Nigerian crude within the country.

In a statement issued by the refinery, Dangote posed a thought-provoking question, querying “Why should the plant deviate from this focus?”

Dangote reassured the public that the issues surrounding the domestic supply of crude oil for the refinery were currently being addressed by the relevant parties involved.