Dangote group aims to set up an oil trading firm in London as part of strategies to run crude and product supplies for its new refinery. The Dangote Petroleum refinery which was opened for operations in May 2023 is expected to have commenced productions in January 2024.
This move is to ensure that Dangote has full autonomy of operations over the business and reduce the role of world’s trading firms that have been involved in negotiations to proffer terms of loans and crude oil to the refinery in exchange for product exports.
“The giant 650,000 barrel-per-day refinery is set to redraw global oil and fuel flows, and the trading community is closely watching the way it will operate and impact the market” a source close to Reuters was quoted saying.
BP, Trafigura, and Vitol are among the trading corporations that have met with the billionaire in recent weeks to discuss terms for loans for the refinery’s estimated $3 billion in working capital required to purchase big volumes of petroleum, according to trading sources. These corporations met with Dangote in Lagos and London.
The traders desire for the refinery to settle loans with fuel exports, but no deals were made because Dangote recognized that doing so could undermine his control of the business and possibly reduce his profit, according to sources.
“He is going to try and do it himself,” an industry source told Reuters. The source also revealed that the new trading team will be overseen by ex-Essar dealer Radha Mohan who joined Dangote in 2021 as Director of International Supply and Trading.
The $20.5 billion Dangote Petroleum refinery, Africa’s largest, which was built over the course of 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.
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.
The two fuels on offer are typical products of running light sweet crude through a crude distillation unit (CDU) in a refinery without further upgrading capacity. It is expected to take months for upgrading units to be brought online, experts have said.
The refiner began buying crude in December last year and Nigeria’s state-owned oil firm NNPC Ltd has been the main supplier. Dangote Petroleum has also purchased some U.S. oil and is expected to receive 2 million barrels of U.S. WTI Midland in early March, according to LSEG and Kpler.
Nigeria has for years relied on expensive imports for nearly all the fuel it consumes but the $20 billion refinery is set to turn it into a net exporter of fuel to other West African countries, in a huge potential shift of power and profit dynamics in the industry. The refinery would produce oil for both local consumption and international trade.
