Shortage of Crude Oil Delays Productions of Dangote Refinery, Five Others

Olufemi Adeyemi 

Lack of supply to Dangote shameful, says FG, minister blames low production

Apart from Dangote Refinery, five other modular refineries are also affected by the unavailability of crude oil for their production.

In September, it was reported that the 650,000 barrels per day Dangote Refinery would receive its first cargo of crude and begin operation in October.

The refinery is expected to start producing up to 370,000 barrels per day of diesel and jet fuel but the October production target failed to happen.

The production of refined petroleum products at domestic refineries, including the Dangote Refinery, has been halted due to the failure to supply crude oil to these facilities.

The Dangote Refinery in Lagos, with a capacity of 650,000 barrels per day, missed its October production target.

This is the second time in 2023 that the Dangote Refinery has disappointed hopes of ending petrol importation in Nigeria. As a result, Nigeria will continue to rely on fuel imports.

Industry sources revealed that five modular refineries are ready to begin production but are unable to do so due to the lack of crude oil. The Dangote Refinery in Lekki, Lagos, is also facing the same issue.

On September 20, 2023, Devakumar Edwin, the Executive Director of Dangote Group, revealed that the Dangote Refinery was importing crude oil and expected its first shipment in two weeks. He also mentioned that the refinery would start production in October.

However, there is no evidence of diesel refining from the facility in October. The crude oil supply situation has not improved, as the Nigerian National Petroleum Company Limited (NNPCL) is struggling to provide the necessary crude oil for production.

Modular refinery operators have confirmed that the major problem they face is the unavailability of guaranteed feedstock (crude oil) for their refineries. According to them, International Oil Companies prefer exporting crude oil to earn dollars instead of supplying domestic refiners.

The Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), Olusegun Ilori, stated that five modular refineries are ready to produce refined petroleum products, but the lack of crude oil is hindering their progress. He also mentioned that the existing modular refineries are facing a limited supply of crude.

Meanwhile, oil marketers have criticized the continued export of crude oil instead of supplying it to local refineries. They stressed that providing crude oil to modular refineries would boost local production and reduce the pump price of refined products.

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, confirmed the lack of crude oil to domestic refiners and acknowledged that Nigeria’s low oil production was the main limiting factor. Efforts are being made to increase production and supply crude oil to modular refineries.

Despite the Dangote Refinery’s capacity, modular refineries are still considered viable and essential for Nigeria’s energy needs. They can provide quality refined petroleum products to the local market and help reduce import dependency. The goal is to eventually exceed domestic demand and become an export hub for these products.

Nigeria has imported over 5.52 billion litres of petrol since the removal of the subsidy on May 30, 2023. Oil marketers believe that supporting modular refineries will reduce the country’s dependence on imported petroleum products.

Overall, the delay in the start of the Dangote Refinery and other refineries due to crude oil shortage highlights the challenges faced by the domestic refining industry in Nigeria.

November 02, 2023