Nigeria Launches New Giant Oil Refinery

Nigeria is today set to put into operation the Dangote refinery that the government hopes will alleviate a chronic fuel shortage that has turned Africa's biggest oil producer into a fuel importer.

At 650,000 barrels daily, the capacity of the facility is pretty impressive and, according to Nigerian media, will be enough cover 100% of the country's fuel demand.

The refinery had an initial price tag of $12 billion but ended up costing $19 billion as it ran into delays. Processing is scheduled to begin in June, although, according to Energy Aspect it could begin later in the year, and it would ramp up gradually to full capacity by 2025.

According to Dangote Industries, the parent company of the refinery operator, the facility will not only produce enough fuels for the Nigerian domestic market but also some extra volumes that could be exported. It would also boost the market for Nigerian crude to $21 billion per year, the company said.

The refinery will use more than just local crude, however. The Nigerian National Petroleum Corporation has a deal with Dangote to supply some 300,000 barrels of crude daily. Yet it might not be able to fulfill this obligation due to the decline in Nigeria's oil production as a result of pipeline theft and underinvestment.

Last month, the country's oil output fell below 1 million barrels daily, which was the lowest in seven months and made Nigeria lose its top spot in oil production in Africa, to be replaced by Angola.

According to Punch, the refinery will also process crude from the Middle East and the U.S. shale patch, per configuration.

Nigeria has a capacity to pump 2.2 million barrels of crude oil daily but it would need a major effort to reach this capacity. Its OPEC+ production quota has been set at 1.8 million barrels daily but the country has been consistently falling short of hitting that target.

By Charles Kennedy for Oilprice.com

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