Boosting Nigeria’s domestic oil refining capacity

Dangote Petroleum Refinery and Petrochemicals plant have reached a significant milestone as they received their first cargo of 1 million barrels of crude oil from Shell International Trading and Shipping Company. This development brings the start of operations at the refinery closer, signaling a major step towards boosting Nigeria's domestic oil refining capacity. Ayodele Oni, Partner at Bloomfield Law Practice, shared insights on the implications of this achievement. The arrival of the first cargo of crude oil at the Dangote Refinery marks a positive development after facing months of delays. Oni highlighted the value addition that local refining brings to the economy, emphasizing the potential to reduce the significant amount spent on importing petroleum products like PMS and gas oil. By refining these products domestically, there will be a substantial economic impact, including job creation and a multiplier effect within the country. Looking ahead, the refinery is expecting a total of 6 million barrels to kickstart operations. Reports indicate that the next four cargoes will be supplied by NNPC in the coming weeks, with a final cargo expected from ExxonMobil. Oni expressed confidence in NNPC keeping its promise of timely supply, citing positive movements in the energy sector. He noted that NNPC's equity in the refinery is crucial for ensuring energy security and profitability. As the focus shifts towards ramping up operations at the refinery to full capacity, the production of diesel, aviation fuel, and liquefied petroleum gas will precede the output of premium motor spirit (PMS), also known as petrol. This transition is anticipated to have an immediate impact on the market, particularly diesel prices. Oni suggested that while there may be a marginal decrease in prices due to increased supply, the underlying cost of crude oil will influence the final product pricing. He also mentioned the removal of diesel subsidies and market forces playing a role in determining price fluctuations. Addressing the demand side, Oni estimated that Nigeria consumes around 400,000 to 440,000 barrels per day of premium motor spirits. With the operationalization of refineries like Dangote's, Portacote, and other modular facilities, Nigeria aims to become a net exporter of petroleum products in the future. The potential surplus from these refineries could position the country favorably in the global oil market. In conclusion, the successful receipt of the crude oil cargo at the Dangote Petroleum Refinery signifies a significant stride towards enhancing Nigeria's self-sufficiency in oil refining. As the refinery gears up to maximize its production capacity, the impact on the local market and economy is poised to be substantial. The collaboration between key players like Shell, NNPC, and ExxonMobil underscores the collective effort to drive growth and sustainability in Nigeria's oil and gas sector.