•To save Nigeria scarce FX from fuel imports
•Brent oil hits $89, highest price this year
Emmanuel Addeh in Abuja
The 650,000 mega Dangote oil refinery started supplying petroleum products to the local market yesterday, a company executive and fuel marketing associations told Reuters.
Seen as a major step in the country’s quest for energy independence, the refinery, Africa’s largest, was built on a peninsula on the outskirts of the commercial capital, Lagos, at a cost of $20 billion by the continent’s richest man, Aliko Dangote, and was completed after several years of delay.
The company will save Nigeria the much-needed foreign exchange (FX) that would have been expended on importing the fuels, as well as earn the country some hard currency from the supply of products to foreign markets.
Nigeria spends at least 50 per cent of its $30 billion import expenditure on the fuels. This is expected to reduce considerably, following the latest development.
Reuters quoted Dangote’s Group Executive, Devakumar Edwin, as confirming the shipping of diesel and jet fuel into the local market.
“We have substantial quantities. Products are being evacuated both by sea and road. Ships are lining up one after another to load diesel and aviation jet fuel,” Edwin said.
“Ships load a minimum of 26 million litres, though we try to push for 37 million litres vessels, for ease of operations,” he added.
Local oil marketers agreed a price of N1,225 ($0.96) per litre of diesel following a bulk purchase agreement, before putting their mark-up, said the head of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Abubakar Maigandi.
The association’s members control about 150,000 retail stations across Nigeria, Maigandi was quoted as having said.
The smaller Depots and Petroleum Products Marketers Association of Nigeria said its members were seeking letters of credit to buy petroleum products from Dangote.
“Our members are discussing with banks and these talks have reached advanced stages, when we have our letters of credit, we will begin lifting products,” Femi Adewole, the association’s executive secretary, said.
The Dangote refinery is touted as the turning point to end Nigeria’s reliance on imported petroleum products. Nigeria is Africa’s most populous nation and its top oil producer, yet it imports almost all its fuel due to lack of refining capacity.
Equally, global oil benchmark Brent, yesterday rose above $89 a barrel for the first time since October, albeit briefly, as oil supplies faced fresh threats from Ukrainian attacks on Russian energy facilities and escalating conflict in the Middle East.
Brent futures for June delivery were up $1.35, or 1.5 per cent, at $88.76 a barrel by 11:40 a.m., after touching a peak of $89.08, Reuters said.
In the same vein, US West Texas Intermediate (WTI) crude futures for May rose $1.27, or about 1.5 per cent, to $84.98 after touching a peak of $85.46, also the highest since October.
A Ukrainian drone struck one of Russia’s biggest refineries on Tuesday in an attack that Russia initially said it repelled.
A Reuters analysis of images showing the impact of the attack suggests it hit the refinery’s primary oil refining unit, which accounts for about half of the plant’s total annual production capacity of 340,000 barrels per day (bpd), though it did not appear to have caused serious damage.
Meanwhile, the Organisation of the Petroleum Exporting Countries (OPEC) oil output fell last month, a Reuters survey found, reflecting lower exports from Iraq and Nigeria against a backdrop of ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance.
The organisation pumped 26.42 million barrels per day (bpd) last month, down 50,000 bpd from February, the survey, based on shipping data and information from industry sources, found.
Several members of OPEC+, which include OPEC, Russia and other allies, made new cuts in January to counter economic weakness and increased supply outside the group. Producers agreed last month to keep them in place until the end of June.
The biggest output reductions in March came from Iraq and Nigeria, the survey found. Nigerian production declined, with exports falling more sharply, according to some ship trackers, as the Dangote refinery took in more cargoes.
In the meantime, an OPEC+ ministerial panel is unlikely to recommend any oil output policy changes at a meeting today, five OPEC+ sources told Reuters, as oil prices hit their highest this year.
OPEC and allies, led by Russia, known as OPEC+, will hold an online joint ministerial monitoring committee meeting (JMMC) on April 3 to review the market and members’ implementation of output cuts they have already agreed to extend.
Oil has rallied this year, underpinned by tighter supply and attacks on Russian energy infrastructure and war in the Middle East. Brent crude reached $89 a barrel on Tuesday, up from $77 at the end of 2023.
Two of the sources, who asked not to be named because they were not authorised to speak publicly, said they expected a straightforward meeting, citing the earlier decision to extend output cuts. The meeting is scheduled for 1 p.m. Vienna time.
