Dangote Refinery Resumes US Crude Oil Purchases Amid Domestic Supply Challenges

The Dangote Refinery has resumed purchasing crude oil from the United States to increase its refining capacity and boost production levels. This marks a notable shift following a three-month pause in foreign crude oil purchases, during which the refinery primarily relied on domestic supply.

According to a Bloomberg report on Wednesday, the refinery has acquired a shipment of approximately two million barrels of WTI Midland crude from Chevron Corporation. The cargo is expected to arrive at the refinery in early December, loaded onto the supertanker Azure Nova from the US Gulf.

This purchase suggests possible challenges in securing a sufficient crude supply locally. It also raises questions about the progress of the naira-for-crude arrangement between the Nigerian government and Dangote Refinery, an agreement that had been proposed as a means of facilitating domestic crude transactions.

The Shift to US Crude

The resumption of US crude imports highlights an evolving strategy at the Dangote Refinery, as it continues to ramp up production capabilities. The choice of WTI Midland crude, a premium grade of oil from the United States, aligns with the refinery’s goal of refining high-quality products that meet global standards.

Bloomberg’s report revealed that Chevron Corporation booked the supertanker Azure Nova to transport the crude, with loading scheduled around December 5. This shipment underscores the refinery’s global sourcing strategy, despite being situated in one of the world’s largest oil-producing nations.

Domestic Supply Constraints

The purchase of foreign crude comes amidst signs that the Dangote Refinery may not be receiving adequate supply from the Nigerian National Petroleum Company Limited (NNPC). While the refinery initially prioritized domestic crude, it appears that sourcing from foreign markets has become necessary to sustain operations.

The move also casts doubt on the viability of the naira-for-crude arrangement proposed by the federal government in October 2024. This deal was intended to allow the refinery to purchase crude oil using naira instead of foreign currency. However, it seems the agreement has either faced delays or proved insufficient to meet the refinery’s supply requirements.

Kelvin Emmanuel, an economist, recently noted that the refinery continues to purchase crude from the Nigerian government in dollars, despite the proposed local currency arrangement. This highlights ongoing challenges in aligning domestic policies with the operational needs of the facility.

Implications for Nigeria’s Oil Sector

The Dangote Refinery, expected to be a game-changer in Nigeria’s oil and gas industry, is positioned to reduce the country’s reliance on imported refined petroleum products. However, its reliance on foreign crude oil highlights the complexities of integrating domestic resources into its operations.

This development also raises broader concerns about Nigeria’s crude oil production and distribution systems. While the country boasts significant reserves, logistical, regulatory, and infrastructural hurdles often impede efficient supply to domestic refineries.

The resumption of US crude purchases by Dangote Refinery underscores the urgency of addressing these challenges. Ensuring consistent local supply will not only bolster the refinery’s capacity but also reinforce Nigeria’s push toward energy self-sufficiency.

Looking Ahead

As the Dangote Refinery ramps up production, its sourcing strategies will likely continue to evolve. The facility’s ability to secure adequate crude supplies—whether locally or internationally—will play a pivotal role in achieving its ambitious goals.

The coming months may also provide clarity on the status of the naira-for-crude arrangement and whether the government can implement policies to ensure steady domestic supply. For now, the refinery’s reliance on foreign crude underscores the need for sustained efforts to address inefficiencies in Nigeria’s oil sector.

This strategic pivot, while necessary for the refinery’s immediate needs, serves as a reminder of the pressing need for long-term solutions to bolster local crude supply and maximize the potential of Nigeria’s oil industry.