Why Dangote refinery will disrupt Europe’s Oil & Gas industry – OPEC

The Organisation of Petroleum Exporting Countries (OPEC) has highlighted the significant impact that the $20 billion Dangote Refinery is expected to have on Europe’s oil and gas market.

In its June 2024 Oil Market Report, OPEC listed the Dangote Refinery as one of the key suppliers of diesel and jet fuel that could disrupt Europe’s energy industry, particularly the Northwest Europe (NWE) gasoil sector. This development, OPEC said, will boost the Nigerian economy.

The Dangote Refinery, owned by Africa’s richest man, Aliko Dan­gote, has been recognised as the world’s largest single-train refinery. It began operations in January and has already started influencing global crude flows. Experts predict that as the refinery ramps up to full capacity, it will continue to pressure NWE gasoil performance, especially with additional supplies coming from the Middle East and Mexico’s Olmeca refinery.

The OPEC report revealed that “upside potential for higher production levels from Nigeria’s Dangote refinery, coupled with strong flows from the Middle East and new supplies from the Mexican Olmeca refinery, will likely exert pressure on NWE gasoil performance in the mid-term”.

It stated further, “Europe is one of the world’s largest purchas­ers of refined petroleum products and relied on imports from Asia and the US after the European Union banned the use of Russian diesel in the bloc.”

Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, revealed that the refinery has already exported its first jet fuel cargo to Europe and has exported 90% of its 3.5 billion litres of jet fuel and diesel production.

“It is good to note that from the start of production, more than 3.5 billion litres, which represents 90 percent of our production, have been exported,” Edwin said.

BP has already begun transporting jet fuel from Dangote to Rotterdam, following a successful tender in May. OPEC noted that while the jet/kerosene crack spread in Rotterdam showed a slight decline in June due to supply-side dynamics, demand from the aviation sector is expected to rise, potentially increasing pressure on the European market.

In its initial months of operation, the Dangote Refinery scaled up to 400,000 bpd, delivering a range of products including diesel, jet fuel, naphtha, and fuel oil to both domestic and international markets. The refinery is also set to begin gasoline production, Nigeria’s primary fuel type, by mid-August.

OPEC stated that “in June, the jet/kerosene crack spread in Rotterdam against Brent showed a slight decline, influenced by sup­ply-side dynamics. Despite signs of improving air travel activities, subdued jet fuel demand from the aviation sector weighed on the product market.

“Going forward, European jet/kerosene demand is expected to see upward pressure as con­sumption levels from the aviation sector continue to pick up in the coming months.”

Aliko Dangote, President of Dangote Group, emphasised the refinery’s goal to process Nigerian crude and add value within Nigeria. However, he noted that the facility remains open to sourcing feedstock from other countries, including Libya, Angola, and Brazil, to enhance its operations.