What Nigeria’s new Dangote refinery start-up could mean for Brent

The price of Brent crude could see upward pressure in the coming months if Nigeria’s upcoming Dangote refinery draws in large, domestically produced crude volumes that would otherwise have been targeted for export.

PHOTO: The Dangote Refinery complex. Twitter of @NMDPRAtweets

Africa’s biggest oil producer, Nigeria, has commissioned the 650,000 b/d Dangote refinery. The massive facility is expected to begin operations next month.

The refinery is expected to draw around 300,000 b/d of crude from state-owned Nigerian National Petroleum Corp (NNPC), according to S&P Global.

The refinery, built at a cost of some $19 billion, will mostly process Nigerian crude. But NNPC, which has a 20% stake in Dangote, has struggled to meet production targets due to various reasons, including oil theft and ageing wells.

Nigeria is one of several countries that produce sweet crude, which is typically preferred by refineries in OECD countries. According to Vortexa data, the nation has exported around 188,000 b/d of crude oil in the last six months, mainly to the US, the Netherlands, France, Italy and Spain.

There is a possibility that Nigeria will reduce its crude oil exports, when it diverts domestically extracted crude oil to the new Dangote refinery. This could exacerbate worries over global crude oil tightness, particularly in the EU and the US, and give rise to crude prices, including the leading ICE Brent futures benchmark.

By Konica Bhatt

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