Nigeria started up the Dangote refinery on Monday in hopes of turning the country into a net exporter of petroleum products, but analysts said securing crude supplies could delay achieving full output this year.
Outgoing President Muhammadu Buhari’s administration sees the refinery as the answer to persistent fuel shortages in Nigeria, including the most recent in the run-up to the disputed February presidential election.
Nigeria spent $23.3 billion last year importing petroleum products and consumes about 33 million liters (8.7 million gallons) of gasoline a day. The Dangote Refinery has a capacity of 650,000 barrels per day.
The plant plans to export surplus gasoline, turning Africa’s biggest oil producer into an export hub for petroleum products. It also plans to export diesel, according to Aliko Dangote, Africa’s richest man, who financed the refinery’s construction.
The massive petrochemical complex, said to be the world’s largest single-train refinery, cost $19 billion to build after a delay of nearly a decade, up from initial estimates of between $12 billion and $14 billion, and has an outstanding debt of about $2.75 billion, according to the governor of Nigeria’s central bank.
The complex also has a 435-megawatt power plant, a deep-water port, and a fertilizer unit.
Speaking at the commission ceremony, Dangote said the priority was to increase production to ensure the refinery could fully meet Nigerian demand and eliminate “the tragedy of import dependency.”
The ceremony was attended by President Buhari.
Dangote hopes to start refining crude in June, but London-based research consultancy Energy Aspects said commissioning was a complicated process and it expects operations to start later this year, reaching 50-70 percent next year, with a staggered process from other units. in 2025.
The refinery needs a steady supply of crude, but Nigeria’s oil production has declined due to oil theft, pipeline vandalism and a lack of investment. In April, production fell below one million barrels per day (bpd), below Angola’s output.
Lower production would affect the ability of state oil company Nigerian National Petroleum Corporation (NNPC) to honor an agreement to supply the Dangote refinery with 300,000 bpd of crude, said economist Kelvin Emmanuel, author of a report on oil theft on last year.
NNPC, with a 20 percent stake in the refinery, has production sharing agreements with oil majors such as ExxonMobil, Shell and Eni and is entitled to a share of the crude, which it also trades with traders for gasoline and diesel.
The refinery has not signed an agreement to buy from Nigeria’s oil majors.
That could see Dangote import crude from traders such as Trafigura and Vitol, Emmanuel said, at a time when local refining was expected to save foreign exchange and keep prices lower.
However, Energy Aspects said that in the long term, the Dangote refinery could end Nigeria’s gasoline deficit, reshape the Atlantic Basin gasoline market and export diesel that meets European Union specifications.