Dangote Refinery boosts petroleum shipments abroad amid tightening crude supplies and foreign exchange constraints

The Dangote Petroleum Refinery has substantially boosted its exports of refined petroleum products, hindered by the country's insufficient domestic crude oil supply and persistent foreign exchange constraints that continue to affect its operations.

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As global crude oil prices rise, the 650,000-barrels-per-day refinery is expected to face increased feedstock costs, although stronger prices for refined petroleum products are providing some support for refining margins.

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According to checks by Vanguard, crude oil supply to the refinery under the Federal Government's naira-for-crude arrangement has declined sharply, forcing the refinery to source a larger share of its feedstock from the international market.

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An investigation revealed that despite selling petroleum products in naira to support the domestic market, the refinery has been unable to convert a significant portion of its naira proceeds into the U.S. dollars needed to procure crude oil from international suppliers.

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Engr. Devakumar Edwin, the Group Vice President, Oil & Gas, Dangote Industries Limited, confirmed the development in a telephone interview, stating that the refinery is operating at full capacity and exporting part of its production due to the limited crude supply under the naira-for-crude arrangement.

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Edwin explained that the management took a major risk to support the country by continuing to sell petroleum products in naira, but has been unable to convert those naira proceeds into U.S. dollars, while importers of petroleum products have access to the necessary foreign exchange.

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The situation has unfolded against the backdrop of rising international crude oil prices, with the latest market data showing that Brent crude rose by 0.24 per cent to $89.43 per barrel.

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West Texas Intermediate (WTI) crude gained 0.42 per cent to $82.83 per barrel, while Murban crude climbed 2.47 per cent to $83.78 per barrel, and the OPEC Basket appreciated by 0.94 per cent to $84.17 per barrel.

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Gasoline futures also edged up to $3.391 per gallon, reflecting sustained demand for refined petroleum products in the international market, driven largely by heightened geopolitical tensions in the Middle East and concerns about possible supply disruptions.

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The rally in crude prices will likely translate into increased feedstock costs for the Dangote Refinery, which processes both Nigerian and imported crude oil, as crude accounts for the largest component of refining expenses.