Dangote's Lekki Refinery Runs Dry, Plans to Import U.S. Crude

Dangote's Lekki refinery in Nigeria began a long-delayed test run on January 12, operating at 400,000 barrels per day (BBL/d). The test stopped on January 30 due to a crude supply shortage. The test run of the lone 650,000-BBL/d crude unit is expected to resume in late February. Commercial operations could begin as soon as March, according to IIR research.

Puzzling many analysts is that, despite Dangote's goal of using Nigerian crude as feedstock, it plans to begin imports from the U.S. Trafigura Group has agreed to sell 2 million barrels of WTI Midland for late February delivery, according to Bloomberg.

Despite being a crude exporter, Nigeria's lack of refineries requires it to import almost all refined products, at higher costs. Dangote's goal for the facility was to use domestic crude to reduce imports of refined products.

The lapse in crude supply has sparked timeline concerns. Aliko Dangote, Lekki's funder and Africa's richest man, said he expects the refinery to begin producing gasoline by the end of March. "It's unlikely, but possible, with consistent crude supply and commissioning of the downstream units," noted Hillary Stevenson, senior director, energy market intelligence, IIR Energy. A refinery can produce distillates pretty easily with just a crude unit, but for on-spec gasoline, downstream units are needed. It is important to consider that there have been numerous delays due to various issues. Those include delays in receiving crude supplies, a shortage of funds (government investigations may exacerbate this), unavailability of vendors, workforce shortages, theft, delays in delivery of equipment reordered post-theft, and crude tank farm-to-crude unit connectivity issues, she added. For related information, see January 10, 2024, article - Government Investigation Could Impact Dangote's Lekki Refinery Opening.

IIR Energy's Geoffrey S. Lakings added that some doubt the refinery will meet expectations. He pointed out that Rafiq Raji, a senior associate with the Center for Strategic and International Studies' Africa Program, recently told Business Insider that he doubts the refinery could produce 100,000 BBL/d at first. Raji said he believes it will be 2027 before the refinery will be at capacity, and that at lower operating levels, the facility's yields "will be hugely suboptimal."

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