Nigeria’s Dangote Refinery Threatens $17 Billion European Gasoline Trade

Analysts and traders warn that this development, coupled with heightened competition, could place significant pressure on European refineries, risking closures and conversions to storage terminals

Nigeria’s Dangote oil refinery has commenced operations, potentially disrupting the long-standing gasoline trade from Europe to Africa.

Analysts and traders warn that this development, coupled with heightened competition, could place significant pressure on European refineries, risking closures and conversions to storage terminals.

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The Dangote refinery, which commenced production in January after a staggering $20 billion investment, stands as Africa’s largest and holds the promise of energy independence for Nigeria, the continent’s most populous nation and leading oil producer.

With a refining capacity of up to 650,000 barrels per day (bpd), the facility is poised to become the largest on both the African and European continents upon reaching full operational capacity this or next year.

For decades, Nigeria has relied heavily on gasoline imports due to a lack of domestic refining capacity despite its status as an oil-rich nation. However, with the Dangote refinery coming online, this narrative could undergo a dramatic transformation.

According to data from Kpler, approximately a third of Europe’s average gasoline exports of 1.33 million bpd in 2023 were destined for West Africa, with Nigeria emerging as the primary recipient.

This lucrative trade, estimated at $17 billion annually, faces potential extinction as Nigeria shifts towards self-sufficiency in fuel production.

Eugene Lindell, the head of refined products at consultancy FGE, highlights the impending challenges facing European refineries, particularly those lacking the necessary equipment to meet stringent environmental standards in alternative markets.

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Lindell warns that as much as 300-400,000 bpd of European refining capacity could be at risk of closure due to the rising global gasoline production.

The impact of this paradigm shift is expected to vary across European refineries. Coastal facilities, primarily oriented towards exports, are deemed more vulnerable, while inland refineries, catering to local demand, may prove relatively resilient.

Nonetheless, the prospect of closures looms large, with some refineries facing potential conversion into storage terminals to navigate the challenging market dynamics.

Despite the transformative potential of the Dangote refinery, analysts caution that the transition away from European gasoline imports won’t occur overnight.

However, the gradual erosion of this significant market segment could set the stage for fundamental shifts in the global oil trade landscape.

In conclusion, Nigeria’s Dangote oil refinery represents a game-changer in the quest for energy independence, reshaping traditional trade patterns and posing existential challenges to European refineries.

As the industry navigates these turbulent waters, adaptation and innovation will be crucial for survival in an increasingly competitive marketplace.

 

This article was created using automation and was thoroughly edited and fact-checked by one of our editorial staff members

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