Posing challenge to European oil market dominance, Africa’s richest man Dangote might affect $17 billion revenue
The recently built Dangote refinery could significantly dent the European oil market. The refinery threatens to heighten the competition for European refineries in a market that already seems over-saturated. According to economists, the Dangote refinery might halt the decades-long gasoline trade from Europe to Africa worth $17 billion each year.
Dangote refinery’s 650,000 bpd capacity is poised to challenge European oil market dominance.
The change the European oil market may not be immediate but it would be eventual.
Nigeria’s energy independence is closer as the Dangote refinery accelerates towards full production.
According to Kpler statistics, as seen in the American news site Reuters, West Africa received over one-third of Europe’s 1.33 million BPD average gasoline exports in 2023, more than any other area, with Nigeria receiving the lion’s share of that total.
However, this is bound to change once the Dangote refinery which is touted to be able to refine up to 650,000 barrels per day (bpd) commences full production.
The refinery, once it reaches its fullest capacity would be the largest in Europe and Africa.
The refinery’s inauguration has been considered the tipping moment in Nigeria’s drive for energy independence. Despite being the largest country by population and the top oil producer on the continent, Nigeria’s oil market has been plagued by an inability to refine its own oil, leaving it at the mercy of foreign markets.
The establishment of the Dangote refinery alongside the rehabilitation of dilapidated refineries in the country is expected to change its dependence.
“The loss of the West African market will be problematic for a small set of refineries that do not have the kit to upgrade their gasoline to European and U.S. specification,” consultancy FGE’s head of refined products Eugene Lindell said.
According to Kpler analyst Andon Pavlov, 300-400,000 bpd of European refining capacity is at risk of ceasing as global gasoline output rises.
A European refinery executive who declined to be identified stated that coastal refineries oriented for exports will be more susceptible, but interior refineries are less vulnerable since they rely on local demand.
“The changes won’t happen overnight, but they could ultimately lead to closures of refineries and their conversion to storage terminals,” he stated.
“Around 30 European refineries have shut down since 2009, data from refining industry body Concawe show, with nearly 90 plants of various sizes and complexities still in operation. Closures have been brought on by competition with newer and more complex plants in the Middle East and Asia and more recently because of the impact of the coronovirus pandemic,” Reuters report states.
Dangote refinery
The $20.5 billion Dangote refinery, Africa’s largest., built over 2 decades, has a processing capacity of 650,000 barrels per day. It aims to produce 250,000 barrels per day of gasoline and 100,000 barrels per day of gasoline and diesel.
The refinery would produce oil for both local consumption and international trade. Already, 150,000 fuel stations run by the Independent Petroleum Marketers Association of Nigeria (IPMAN) have been sanctioned to receive fuel supplies from the newly built private Dangote refinery.
The 650,000 barrel-per-day capacity refinery is set to influence the global oil and fuel flows, as the trading community watches to see how significant this influence would be.
So far, the refinery has processed around 8 million barrels of oil between January and February, according to Reuters, and will take months to reach full capacity.
