The ramp up of operations at Nigeria's 650,000 b/d Dangote refinery, likely to occur next year, will affect west African crude trade flows in 2025.
The refinery remains well below full capacity for now — with estimated deliveries averaging just under 260,000 b/d since March — but Nigerian operator Dangote Group is aiming for 350,000 b/d of throughput in a first phase of operations.
When this takes place, and Dangote makes full use of its 385,000 b/d monthly allocation deal with state-owned NNPC, it will affect the amount of Nigerian crude left to be exported to the country's key outlet — the European market.
Although NNPC only supplied around 202,000 b/d in December, the total volume under the deal is equivalent to around a quarter of Nigeria's crude and condensate exports monthly exports.
The deal will eventually bring support to Nigerian crude differentials when European demand is stronger — or at least cushion the decline when demand is weaker.
As Dangote ramps up operations, the refiner could widen its crude slate, which could also affect crude trade flows.
The refinery will take receipt of a 2mn bl cargo of US light sweet WTI bought from Chevron via a tender that closed November, after a three-month hiatus related to credit issues.
Dangote has so far run exclusively on Nigerian crude and WTI, but Nigerian banks eased restrictions on provision of trade finance to the refiner, which could open the door for possible purchases of non-Nigerian west African crude.
Sources close to the refinery point to Angolan heavy and medium sweet grades as likely to become part of the refinery's basket intake.
Market participants also pointed that the recent WTI tender might signal Dangote's attempt to increase run rates.
Meanwhile, NNPC, in order to satisfy both Dangote and already existing commitments, will seek to increase its crude production, which has been severely constrained by theft and vandalism over the past few years. But recent efforts by the government appear to be paying off, with upstream regulator NUPRC reporting that volumes lost to theft and vandalism over the past year averaged 15,000 b/d, compared with over 100,000 b/d in 2021.
West African output
NNPC is targeting crude output of 2mn b/d by the end of 2024, while the country's president Bola Tinubu has set a crude production goal of 2.6mn b/d by 2027. The latest figures from NUPR have November crude production at 1.49mn b/d and the targets might prove too ambitious, even though output rose from 1.33mn b/d in December last year.
Angola, the second largest crude producer in Africa behind Nigeria, has also endured years of output decline since a peak of nearly 2mn b/d in 2008. Argus estimated the country's crude output at 1.14mn b/d in October, broadly unchanged from September, but down from 1.20mn b/d in August.
Angola has been trying in recent years to encourage investment in its upstream sector, and recently signed an initial agreement with Shell to explore six oil offshore blocks.
The upstream regulator ANPG has a target of awarding 50 oil blocks by the end of 2025 and has said it is planning a licensing round for the first quarter of that year.
