Output from the Dangote refinery is expected to displace the country’s fuel and chemical imports in 2024, the Economic Intelligence Unit (EIU) has said.
The EIU forecasted a “tentative” increase in Nigeria’s crude oil production from an average of 1.12 million barrels per day (bpd) in 2022 to 1.4 million bpd by 2028.
The Economist Group’s research and analysis division, which provided this insight in its latest Nigeria country report, attributed this projection for 2028 to recent sector developments.
These developments include the near completion of the Dangote refinery, stability in the oil-producing Niger Delta, and the full commercialisation of the Nigerian National Petroleum Company Limited (NNPC).
EIU said: “In terms of petrol, it seems likely that prices will again be deregulated when the Dangote refinery is able to replace imports from late 2024 onwards, to incentivise the facility to sell locally rather than export its output.
“Deregulated pricing will also allow NNPC Limited, which initially absorbs subsidy costs (which are then deducted them from federal revenue), to start operating as a commercial entity, as required by the 2021 Petroleum Industry Act (PIA), a major piece of oil sector legislation.
Combined with more competitive fiscal terms under the PIA, eventual commercialisation of NNPC Limited makes the outlook for investment in hydrocarbons stronger, according to the report.
It said multinationals in joint venture partnerships with the company will be more confident about cash-calls being met.
The EIU said: “Oil production has been falling over the past decade, but we tentatively project a gradual rise in output, from an average of 1.12m bpd in 2022 to 1.4m bpd in 2028. The increase will not necessarily be linear, however, given numerous operational difficulties, in particular insecurity in the Niger Delta.
“We expect oil export volumes to increase as security in the Niger Delta allows for higher oil output, and the balance will be complemented by the displacement of fuel and chemical imports in 2024 as the Dangote refinery ramps up production.”
S&P Global Commodity Insights reported last month that Dangote refinery would receive its first cargo of crude in the next two weeks and would begin producing up to 370,000 bpd of diesel and jet fuel from October, citing a senior company executive at Dangote Group.
In an exclusive interview with S&P Global, Devakumar Edwin, Dangote Group’s executive director, who is overseeing the $19.5 billion refinery, outlined a detailed production timeline, shed light on crude and product flows and laid out a litany of complications and delays to the project since it was first mooted in 2013.
Edwin said the refinery, which was officially inaugurated by former president Muhammadu Buhari in May, will launch in phases, beginning with 350,000-370,000 bpd of diesel and jet fuel by October, when the crude distillation unit, sulfur block and hydrogen plant should be online.
Then on November 30, he said, the refinery will start the phased ramp-up to 650,000 bpd, around half of it petrol, the key area of Nigerian fuel demand.