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Indian refineries are purchasing Nigerian crude, while Nigeria’s Dangote Petroleum Refinery is primarily using American oil.
This situation highlights the intricate dynamics of the global oil market, with Indian state refiners acquiring Nigerian crude oil even as Africa's largest refinery, situated in Nigeria, increases its imports from the United States.
This paradox has been labeled as “oil trade irony” by industry experts. Sources revealed to Reuters that the Indian Oil Corporation has recently procured one million barrels of Nigeria’s Agbami crude for delivery in September through a contract with the global trader Trafigura.
This acquisition is part of a wider initiative where Indian refiners have secured millions of barrels from sources other than Russia. Interestingly, while Indian refiners ramp up purchases from Nigeria, the $20 billion Dangote Petroleum Refinery in Lagos is increasingly dependent on US imports to supply its processing facilities.
In July, the refinery imported an average of 10 million barrels, emphasizing its growing reliance on US crude despite an existing naira-for-crude arrangement with the Federal Government.
Reports indicate that Indian Oil Corp and Bharat Petroleum have also secured a million barrels of non-Russian crude for delivery in September and October following US pressure on India to cease Russian imports.
Since 2022, Indian state refiners had largely withdrawn from the spot market, becoming one of the few buyers of cheaper Russian crude after the Ukraine invasion. However, they halted such purchases in late July due to US President Donald Trump's pressure.
Over two million barrels of crude from Nigeria were reportedly acquired for September and October deliveries. India’s second-largest state refiner, BPCL, negotiated for the arrival of these barrels in September.
This included one million barrels of Angola’s Girassol, one million barrels of US Mars, three million barrels of Abu Dhabi Murban, and two million barrels from Nigeria.
Data from Kpler reveals that in July, US crude accounted for roughly 60% of Dangote’s intake of 590,000 barrels per day of crude, while Nigerian grades constituted the remaining 40%.
The Dangote refinery's crude imports peaked at 590,000 bpd in July, marking a record high with US barrels surpassing Nigerian suppliers for the first time, driven by ongoing domestic supply challenges.
The refinery currently operates at 85% of its full capacity, with intentions to increase to 700,000 barrels per day.
With crude imports hitting a record 590,000 bpd in July, Kpler noted that US crude comprised a significant 370,000 bpd (60%), whereas Nigerian grades made up only 220,000 bpd (40%), mainly from Amenam, Bonny Light, and Escravos.
Kpler noted that this is the first instance that US crude has eclipsed Nigerian sources, attributed to various factors, including competitive pricing of WTI versus certain domestic options as US barrels struggled to establish a foothold in Asia amidst rising OPEC+ output and declining Murban spot premiums.
The Dangote refinery has expressed concerns about the ongoing difficulty in procuring domestic crude due to adherence to Domestic Crude Supply Obligations.
In July, Dangote’s crude stocks increased to 6.73 million barrels, demonstrating a month-on-month rise of 2.5 million barrels, indicating that a segment of elevated imports was diverted into storage.
Moreover, Nigerian indigenous oil companies are increasingly taking the lead in the upstream sector, capitalizing on the exit of international players and enhanced stability in onshore operations.
Crude and condensate supply remained stable at 1.75 million barrels per day in July, lifting the three-month average to its highest in over five years, buoyed by rising onshore output and reductions in pipeline disruptions. Reports from Jones Creek indicated that fewer pipeline outages helped boost flow to the Ugo Ocha terminal, with exports doubling to 65,000 bpd recently.
Kpler also noted that CJ crude production achieved its highest level of the year in June, reaching 55,000 bpd, with some cargoes shipped to Canada’s Point Tupper and subsequently re-exported to the US.
In August, the Dangote refinery's domestic crude intake dropped to 220,000 bpd, down from 275,000 bpd the previous month, coinciding with record-level US imports at 370,000 bpd. Despite intentions to prioritize Nigerian supply, Dangote’s current crude strategy appears flexible, largely influenced by market incentives.
The majority of the refinery’s output is gasoline, mostly sold locally, although some is exported to Oman and Ivory Coast, with jet fuel aimed at markets in West Africa and Northwest Europe, as per Kpler’s data.
Recently, Dangote Group President Aliko Dangote announced that the refinery has transformed Nigeria into a net exporter of refined products, claiming, “From early June to July, we exported about 1 million tonnes of PMS in the last 50 days.”
With a gasoline yield of 46%, the refinery's planned expansion to 700,000 bpd could boost gasoline production capacity to 322,000 bpd, an increase from 300,000 bpd.
However, some analysts believe that expecting Dangote to operate at full capacity consistently is overly optimistic, considering potential mechanical issues and ongoing maintenance needs. Hence, full utilization may not be anticipated before the fourth quarter of 2026.
To enhance gasoline yields, condensate naphtha was imported in early July, as Dangote brought in approximately 22,000 tonnes monthly (6,000 bpd) to support its hydrotreater for gasoline production. These naphtha imports indicate "ongoing operational difficulties" at the refinery’s 204,000 bpd RFCC unit, which has faced reactor and regenerator problems since January.
Looking forward, Kpler anticipates Nigeria’s crude and condensate supply to average around 1.65 million barrels per day for the rest of the year—a steady level with no major new fields expected in the upcoming months, though representing a slight increase compared to the second half of last year.
Nonetheless, local producers are gradually ramping up activity, with significant growth anticipated next year. Companies like Seplat are working to enhance output by restarting shut-in wells and launching new drilling ventures across former ExxonMobil blocks, according to their latest financial statements.
Additionally, infrastructure developments continue, with the Otakikpo terminal, established by Green Energy, achieving its first crude export in June, marking Nigeria's first privately built onshore terminal in over fifty years. Conoil successfully completed its inaugural Obodo crude shipment, while Renaissance Africa Energy is preparing to boost production following its acquisition of Shell's onshore assets.
