In a huge setback for Nigeria’s ambitious plans for petroleum product self-sufficiency, the country’s domestic refineries, notably the high-profile Dangote Refinery, are experiencing production delays due to insufficient crude oil supply.
The Dangote Refinery, which has a daily production capacity of 650,000 barrels, failed its October production target for the second time in 2023, extending Nigeria’s dependency on petroleum imports.
The problem goes beyond the Dangote Refinery and affects many modular refineries that are about to start production. Despite original forecasts that diesel and jet fuel will be produced by October 2023 and gasoline by November 30, 2023, the situation has not improved. Notably, the scarcity of crude oil feedstock has generated worries, especially since the Dangote Refinery continues to import crude oil in a country that should be self-sufficient.
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Officials at the Dangote Refinery have expressed concern about the ongoing scarcity of crude oil essential for production, raising issues about the logic of importing crude oil in a country that produces it. This is a concern shared by other corporations and lenders planning to start refining operations.
In addition to the four modular refineries that are presently in operation, five or six more companies are planning to enter the market. However, feedstock constraints are impeding the country’s ambitions to become a self-sufficient producer of refined petroleum products.
Domestic refineries are confined and have limited access to crude oil supply due to a variety of circumstances, including certain crude oil suppliers’ inclination for export to create foreign money. Furthermore, Nigeria is required to meet OPEC’s permitted quota for crude oil output for export, complicating the local refiners’ search for adequate crude oil supply.
This circumstance highlights the crucial importance of a constant and stable supply of crude oil to ease domestic refining, minimize fuel imports, and address a significant issue in Nigeria’s energy sector.
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