Gasoline shipments to Nigeria saw a sharp decline in the first two weeks of October, according to shipping tracking data from S&P Global Commodity Insights. This decrease coincides with the arrival of domestic supply from the Lagos-based Dangote refinery, which appears to have reduced the appetite for exports.
However, with the new 650,000 barrels per day (bpd) refinery operating at around half capacity and the key gasoline production unit, the Reformed Catalytic FCC (RFCC) remains unstable. During its build-up, traders warn that Nigeria could still face a substantial fuel deficit in the absence of imports.
A Significant Drop in Exports
According to data from S&P Global Commodities at Sea, only 280,400 barrels of gasoline and blend were shipped to Nigeria in the first week of the month, ending October 6, via a single MR, compared to a weekly average of 1.3 million barrels in August. In the week ending October 13, only one tanker reported shipping gasoline to Nigeria, with only 290,567 barrels leaving Antwerp for delivery to Lagos. These two October shipments are significantly lower than the 12 shipped in the first half of August and September respectively.
Since October 8, no gasoline shipments have been reported to Nigeria. This drop in export activity marks the first disruption to a previously well-established flow, primarily from North-West Europe to West Africa, with the arrival of domestic refining capacity.
Reduced Dependency and Risk of Deficit
Without its own domestic supply chains, Nigeria – Africa’s largest demand hub – typically imported between 200,000 and 300,000 b/d of gasoline to ensure the majority of its fuel supply, creating a dependency that the Africa’s richest man, Aliko Dangote, sought to cut back with the inauguration of his new refinery in January.
In September, the refinery reached the key milestone of producing its first gasoline supplies from its reformer, followed by its higher-output RFCC, which continues to be ramped up. Refinery sources said Nigeria’s state oil company, NNPC (Nigerian National Petroleum Corporation), has so far been its sole buyer of gasoline, having taken delivery of 90 million liters (about 570,000 barrels) of the refinery.
Future Perspectives and Challenges
Yet with shipments to Lagos appearing to decline preemptively, traders have flagged a potential shortfall in availability as domestic production remains insufficient to cover consumption of more than 300,000 b/d.
“There is currently no timetable for gasoline deliveries from Europe to Nigeria,” a trade source said, speculating that the new refinery could meet at best a quarter of domestic demand.
“The rest will have to come from what is available on the Lomé offshore market,” the trader added, citing recently heard values of $35 to $40 per metric ton above Platts 10 ppm barges.
Impact on the Global Market
At the same time, a reduced appetite for arbitrage from North-West Europe has led to a decline in purchasing activity for FOB AR 10 ppm barges in the Platts market closing valuation process, according to sources.
Dangote Supply Channels
When the refinery permanently replaces previous gasoline streams will depend on the smooth ramp-up of its operations and delivery of products to the domestic market.
Refinery sources said a contract remains in place with NNPC to act as sole buyer of its gasoline supply, despite an announcement by the country’s Finance Minister, Wale Edun, that Nigerian traders are now free to buy directly from the refinery.
A refinery executive said the plant’s RFCC unit, intended to increase gasoline production volumes, could be stabilized by Nov. 11, although Commodity Insights analysts forecast that the unit will only contribute to higher supplies from February 2025.
A faster-than-expected ramp-up would accelerate pressure on gasoline margins in the Atlantic Basin as early as the first quarter of 2025, although, as a very large single-facility refinery, the plant remains exposed to outages and disruptions.
Commodity Insights anticipates the refinery will shift around 260,000 b/d of gasoline flows from Europe to West Africa by 2026, while sugar hydroprocessing margins are expected to remain low, with forecast average of minus $1.50 per barrel through the fourth quarter of 2024 and the first quarter of 2025.
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