Despite hopes for increased domestic refining capacity in Nigeria, including from the much-anticipated Dangote Refinery, the country continues to face fuel shortages due to the inadequate supply of crude oil to local refineries. The Dangote Refinery, which was expected to begin production in October 2023, has missed its target for the second time this year. Other modular refineries are also affected by the lack of crude oil supply. International Oil Companies (IOCs) prefer exporting crude for dollar earnings, exacerbating the situation. Nigeria’s dependence on fuel imports persists as domestic refineries remain underutilized.
Key Points:
- Dangote Refinery Delays: The 650,000 barrels per day Dangote Refinery in Lagos missed its October production target. This has led to concerns about Nigeria’s continued reliance on fuel imports.
- Crude Shortage Impact: About five modular refineries are ready to commence production of refined petroleum products but are unable to do so due to the unavailability of crude oil. The Dangote Refinery has also faced challenges in receiving the required volumes of crude oil.
- Importation of Crude by Dangote Refinery: The Dangote Petroleum Refinery initially imported crude oil and expected its first cargo in about two weeks in September. This temporary measure was attributed to the commitments of the Nigerian National Petroleum Company Limited (NNPCL) to other entities.
- Issues with Feedstock Supply: Modular refinery operators emphasize that the lack of guaranteed feedstock (crude) is a significant bottleneck in commencing production.
- Government’s Efforts: The Federal Government acknowledges the challenge of inadequate crude supply to domestic refineries. Efforts are being made to address the situation, with initiatives to enforce domestic crude oil supply obligations.
- Impact on Fuel Importation: Nigeria has imported over 5.52 billion litres of Premium Motor Spirit (petrol) since the removal of the PMS subsidy on May 30, 2023. Despite high foreign exchange challenges, the country continues to rely on fuel imports.
Conclusion: The delay in commencing production at the Dangote Refinery, along with the challenges faced by other domestic refineries, highlights the ongoing difficulties in achieving self-sufficiency in refined petroleum products in Nigeria. The inadequate supply of crude oil to local refineries, coupled with the preference of IOCs for crude exports, underscores the need for strategic measures to bolster the domestic refining sector. Balancing domestic production with export obligations will be a critical aspect of Nigeria’s energy policy moving forward.
