New refineries: FG to slash crude allocation to Dangote Refinery

The Federal Government may reduce the crude oil supply to Dangote Petroleum Refinery, potentially lowering its current allocation of 300,000 barrels per day, unless Nigeria’s oil production increases.

This reduction is part of adjustments within the government’s naira-for-crude initiative, prompted by the recent restart of the Warri and Port Harcourt refineries. These refineries currently operate at a combined capacity of approximately 135,000 barrels per day.

The decision to scale back Dangote’s crude supply is intended to ensure adequate crude distribution among all domestic refineries, promoting competition in the downstream sector, with the government facilitating this process through the naira-for-crude initiative.

Before the initiative, Nigeria allocated 445,000 barrels per day of crude to domestic refineries operated by the Nigerian National Petroleum Company Limited (NNPCL).

Sources familiar with the development confirmed the planned reduction. One source stated, “Crude allocation to Dangote and other local refineries will be reduced because our refineries are coming back online. Warri, Port Harcourt, and Kaduna are now operational or close to it.”

Last year, the Federal Executive Council (FEC) approved a proposal by President Bola Tinubu to sell crude to Dangote and other refineries using local currency, with Dangote receiving about 300,000 barrels per day from the 450,000 barrels allocated for domestic consumption.

The agreement, which was initially set for six months, will undergo adjustments as more refineries begin operations. The reduction in supply to Dangote is likely, with the refineries expected to share the 450,000 barrels per day based on their capacities.

The government is also focused on increasing crude production to meet the growing demand from domestic refineries. Current efforts aim to boost output to over 2 million barrels per day, which would help stabilize crude allocations and meet local refinery requirements.

Another issue is that the government will no longer sell crude on credit to refineries, requiring immediate payment for crude purchases.

The National Oil Company’s potential challenges in meeting local crude demands are further compounded by the need to secure additional funding. NNPCL is reportedly seeking a $2 billion syndicated loan to stabilize finances and boost production.

Meanwhile, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has revealed that the country’s refineries will need a total of 123.48 million barrels of crude oil between January and June 2025, with plans to ramp up production to meet these needs. The NUPRC is optimistic that increased collaboration between local refineries and producing companies will strengthen Nigeria’s refining capacity in the near future.