Dangote Refinery has taken a major step in diversifying its crude oil supply by purchasing 1 million barrels of Algeria’s Saharan Blend crude from Glencore, a leading global trading firm.
The shipment, expected to arrive between March 15 and 20, marks the first time the refinery will be refining Algerian crude, a high-quality light sweet crude known for its low sulphur content and premium refining yields.
Why This Matters
Dangote Refinery, with a capacity of 650,000 barrels per day, has been actively seeking new crude sources beyond Nigeria. While it initially secured a supply deal with the Nigerian National Petroleum Company Limited (NNPCL) for 15 cargoes, only six were delivered. The refinery has since struggled to get additional supply from international oil companies (IOCs) operating in Nigeria.
Due to these challenges, Dangote Refinery has been forced to buy Nigerian crude at an extra cost of $3-$4 per barrel from international traders. This additional expense translates to about $3-$4 million more per cargo, increasing the cost of production.
A Strategic Shift in Crude Supply
The decision to source crude from Algeria signals a shift towards greater flexibility and competitiveness. Saharan Blend crude, with an API gravity of 45.3 and just 0.1% sulphur content, is highly sought after and traditionally exported to Europe. By tapping into this supply, Dangote Refinery is ensuring it can optimise production without relying solely on Nigerian crude.
Market sources indicate that while tankers loaded in Algeria this February were not destined for Africa, the cargo for Dangote Refinery will likely load in March. A trader familiar with the deal noted that Saharan Blend is well-suited for the refinery’s operations and is competitively priced compared to Nigerian crude grades.
Dangote’s Expanding Crude Sourcing Strategy
Beyond Algeria, Dangote Refinery has been exploring long-term crude supply agreements from international markets, including the United States and Brazil. Speaking last year, Aliko Dangote, the refinery’s founder, emphasised the need to look beyond local suppliers:
“We will start importing crude oil from African countries. When we get to those countries, we’ll start negotiating with them and bringing in supplies from there.”
However, he also pointed out that if Nigeria’s crude were readily available, there would be no need to look elsewhere.
The Bigger Picture for Nigeria’s Oil Industry
This latest move highlights ongoing issues in Nigeria’s crude oil supply chain, where local refineries struggle to access feedstock despite being in an oil-rich country. It also raises concerns about NNPCL’s ability to meet domestic refinery needs, as more private refiners, including modular refineries, begin operations.
With Dangote Refinery now securing crude from other African nations, the conversation around Nigeria’s crude allocation, local refining policies, and export priorities is set to intensify.
For now, all eyes will be on the refinery as it processes its first batch of Algerian crude, paving the way for a more diversified and competitive refining sector in Africa.
