Nigeria’s new Dangote oil refinery, the largest in Africa, is making waves in the West African fuel market. While the refinery is still ironing out some kinks, its production of gasoil, a key fuel for transportation, is impacting exports and challenging traditional suppliers.
The $20 billion refinery, located near Lagos, is currently producing a lower-grade gasoil than initially anticipated. This is due to units needed for cleaner fuel production being offline. As a result, the refinery is focusing on exporting this gasoil to neighboring West African countries.
Data from Kpler, an analytics firm, shows exports skyrocketing. May 2024 saw nearly 100,000 barrels per day (bpd) of gasoil exported, nearly double the volume of the previous month. The majority went to West African nations, though one shipment even reached Spain.
While preliminary data suggests June’s gasoil exports have dipped, the refinery is still exporting a significant amount of oil products overall, including fuel oil, naphtha, and jet fuel, reaching a combined total of 225,000 bpd.
The impact on the market is undeniable. A European distillates trading source stated that the Dangote refinery has “changed the balances in West Africa,” with repercussions felt in European markets as well.
This shift is evident in Kpler’s data, which shows a significant drop in gasoil exports to West Africa from both Europe and Russia. May saw exports from the EU and UK plummet to a four-year low of 29,000 bpd, while Russia’s exports hit an eight-month low of 87,000 bpd during the same period.
The Dangote refinery is also supplying some of this lower-grade gasoil to the domestic Nigerian market. However, a dispute has arisen regarding who is responsible for selling this dirtier fuel.
Nigeria’s 2021 oil law mandated a stricter sulphur content limit of 50 parts per million (ppm), aligning with regional standards set by the Economic Community of West African States (ECOWAS) in 2020. However, regulators allowed a temporary grace period until June for local refineries and importers to comply by permitting the sale of gasoil exceeding 200 ppm.
