Nigeria's Dangote refinery to export first gasoline as local market struggles

Nigeria's giant Dangote refinery has agreed to export more than 200,000 mt of its gasoline, according to a company official, as local demand for costlier, higher quality fuel has disappointed stakeholder expectations.

Speaking to S&P Global Commodity Insights Nov. 11, an executive at the refinery confirmed that the refinery had signed its first export orders for its gasoline and will begin dispatching product "as soon as the ships arrive".

Championed as a project to end Nigeria's import dependence for fuel, the 650,000 b/d refinery had been widely expected to market all of its gasoline domestically to service roughly 340,000 b/d of local demand.

However, since beginning gasoline production in September and significantly improving the quality of its fuel in October, rising prices have meant the refinery has struggled to shift its supply. Facing a fivefold increase in prices at the pump from the previous year, locals have warned that fuel affordability has been severely challenged, while the regulator, the NMDPRA, said in August that demand could drop by as much as a quarter year-on-year.

On Oct. 29, refinery CEO Aliko Dangote complained that the refinery was wasting money holding over 500 million liters (around 3.1 million barrels) of fuel in storage, while the company has blamed illicit low-quality imports for undercutting its prices and threatened to sue state oil company NNPC for continuing its fuel imports.

In the first week of November, the refinery made its first attempt to sell gasoline abroad, issuing a public tender for the fuel type, but later appeared to bow to public pressure by revoking the offer.

Three West African traders said the refinery initially issued a tender to sell 40,000 mt of gasoline, which two confirmed specified product with a sulfur content of 150 parts per million.

One source said that the refinery had called the initial tender a "mistake", while a second called the move "controversial" while Dangote continues to produce less than a third of Nigeria's domestic gasoline demand.

The refinery official confirmed that the 40,000 mt tender had been canceled, but said Nov. 11 that the company had the surplus product to begin exporting. "We have the stocks," he said.

Supply channels

Since starting operations in January, Dangote has sold its diesel, jet fuel and other products on the global market, mostly via traders Vitol and Trafigura and international energy company BP, according to S&P Global Commodities at Sea data.

Initially, it agreed an exclusive supply agreement with NNPC for its gasoline, but by Nov. 4 had also begun selling to local marketers, the refinery executive said.

The refinery has reported that its gasoline meets quality standards with a sulfur content of below 50 ppm, marking a significant improvement for the Nigerian market, for which 500 ppm was still the standard in late 2023.

The improved fuel quality has added upside to domestic retail prices, but has also meant that more prospective buyers are lining up for supplies.

Speaking on the sidelines of African Energy Week, Mustapha Abdul-Hamid, CEO of Ghana's National Petroleum Authority, said Nov. 7 that Ghana is interested in potential gasoline imports from the refinery, which was previously producing above its 50 ppm national standard.

"Now it's able to do 50 ppm it definitely should be cheaper to buy out of Nigeria than from Rotterdam," said Abdul-Hamid, venturing that supplies could be blended with 500 ppm product from Ghana's Tema refinery.

Traders have also expressed interest in routing the product to regional West African shorts or destinations such as New York, which could present attractive arbitrage opportunities from Nigeria.

Sources speculated that closer ties between the refinery and the Caribbean, evidenced by a recent state visit by the prime minister of Grenada and chairman of the Caribbean Community (CARICOM), could also translate to a potential term contract.

A representative for the Dangote Group said the partnership will initially focus on trade opportunities for its cement business, though officials had previously hinted that the business would be open to crude-for-products deals with its Caribbean counterparts.

Platts, part of S&P Global Commodity Insights, assessed CIF WAF gasoline at a $50/mt premium to European 10 ppm barges, having risen from an $8/mt premium Oct. 1. Gasoline in the offshore market typically trades as a differential to Platts 10 ppm FOB AR barges.