Dangote to begin crude oil production in Q1’25

In a recent interview with CNBC Africa, Oyeyemi Oke, Partner at AO2Law, shed light on the potential impact of Dangote Group's plans to commence crude oil production in the first quarter of 2025. The announcement by the Dangote Group is seen as a positive development for the industry, with expectations of increased reserves and production volumes. However, Oke believes that the proposed volume of 20,000 barrels per day may not cause significant disruption to the market, especially considering Nigeria's current production levels and OPEC quotas. The acquisition of oil assets by Dangote since 2015 is also seen as a strategic move to support the backward integration model for the Dangote refinery. Another focal point of discussion was the ongoing meetings between Dangote refinery officials and oil marketers to establish pricing metrics. Oke noted that the clarity on this matter has improved following the announcement that other marketers can now lift refined products directly from the refinery. This development signifies a shift away from the Nigerian National Petroleum Corporation (NNPC) acting as the sole importer of refined products, opening up opportunities for increased volumes from both local and imported sources. The pricing negotiations between the refinery and marketers are expected to be based on a willing buyer, willing seller basis, in line with the fully deregulated downstream market. When delving into the impact on petrol pump prices, Oke outlined two potential scenarios. The first scenario entails market dynamics, including international crude prices and exchange rates, influencing the pricing at the pump. This could lead to fluctuations in pump prices based on external market shocks. The second scenario paints a picture of a fully deregulated market potentially leading to price reductions in the mid to long term due to increased market availability. The overall implications of Dangote Group's foray into crude oil production, coupled with the evolving downstream sector landscape, offer opportunities for growth and competition in the Nigerian oil industry. As the industry awaits the outcome of the meetings between Dangote refinery and oil marketers, it remains to be seen how the pricing dynamics and market structure will evolve in the coming months.