In a landmark development for Nigeria’s energy sector, the Dangote refinery in Lagos has commenced petrol production for the first time in 28 years, marking a pivotal shift in the nation’s fuel landscape. The 650,000 barrels per day facility has successfully completed its test phase and is now poised to alleviate the acute petrol shortages that have plagued Nigerian cities and towns. This major breakthrough comes after decades of failed attempts to rejuvenate the country’s aging refineries and promises to bring much-needed relief to consumers across the country.
Despite investing billions in maintaining its four national refineries over the past two decades, Nigeria has struggled to get them fully operational. The country, which consumes approximately 66 million liters of petrol daily, has been spending over $10 billion annually on fuel imports. The Dangote refinery, once at full capacity, is projected to produce about 330,000 barrels of petrol per day, representing over 1% of global demand. However, initial production is expected to start at around 90,000 barrels per day, with a potential increase to 250,000 barrels daily by mid-2025.
The refinery has been gradually ramping up operations following several delays. Aliko Dangote, the owner, had announced in July that petrol production would commence in August, and according to a Dangote spokesperson, the project is on track. A Reuters report confirmed that the refinery is now processing petrol, despite some delays caused by recent crude oil shortages.
This $20 billion facility began operations in January, producing other products such as naphtha and jet fuel. The entry of the Dangote refinery into the petrol market is expected to ease the Nigerian National Petroleum Company Limited’s (NNPC) struggle to supply fuel locally. NNPC, which has accumulated $6 billion in debt to oil traders since January, will exclusively purchase petrol from the Dangote refinery if local demand falls short, with the option to export any surplus.
The timing of this new production is critical, as NNPC faces financial difficulties impacting its fuel supply chain, resulting in persistent fuel queues since July. Clementine Wallop, Director at Horizon Engage, emphasized the significance of this new production and the necessity for transparency in NNPC’s financial management to effectively handle its purchasing from Dangote.
In related developments, OPEC’s oil output fell to its lowest level since January due to disruptions in Libyan supply and ongoing voluntary cuts by OPEC+ members. August production dropped to 26.36 million barrels per day, down from 26.70 million in July. Libya, which faced significant disruptions, contributed the largest supply loss, while other countries like Iraq and Iran also saw changes in their output levels.
