Crude Oil Production Begins at Dangote Refinery

Oil Production Starts at Dangote

“The company source said production at the company's two Niger Delta upstream projects in Oil Mining Leases 71 and 72...”

Nigeria's Dangote Refinery begins crude oil production via Naira-for-crude agreement with NNPCL, boosting economy & fuel supply.

Dangote Petroleum Refinery is poised to commence crude oil production, according to S&P Global Commodity Insights, a London-based energy and commodities intelligence provider.

Defying current raw material sourcing challenges, Dangote Petroleum Refinery is making notable progress in overcoming these hurdles, paving the way for operational kickoff.

Two upstream projects in the Niger Delta, specifically Oil Mining Leases 71 and 72, will spearhead production, initially yielding approximately 20,000 barrels per day.

Output is anticipated to surge significantly by Q1 2025, as the Nigerian oil giant ramps up operations to maximize capacity.

“The company source said production at the company's two Niger Delta upstream projects in Oil Mining Leases 71 and 72 would start at around 20,000 b/d, before ramping up further in the first quarter of 2025,” the report said.

The Federal Government has launched a groundbreaking Naira-for-crude agreement with Dangote Refinery, where the Nigerian National Petroleum Company Limited (NNPCL) will supply crude oil to the refinery in exchange for payment in Naira. This move is aimed at supporting the refinery's operations, as directed by President Bola Tinubu.

Here's how it works: NNPCL will provide approximately 385,000 barrels of crude oil per day to Dangote Refinery, which will then produce petroleum products like diesel and petrol. The refinery will sell these products to the domestic market in Naira, reducing pressure on the currency and eliminating unnecessary transaction costs.

This six-month pilot program is expected to have a significant impact on Nigeria's economy. The country is projected to save around N5.4 trillion from subsidy removal in 2024, and this agreement is a crucial step towards achieving that goal.

Benefits of the Naira-for-crude Agreement:

Reduced Pressure on Naira: By trading in local currency, the pressure on Nigeria's foreign exchange reserves will decrease.

Increased Availability of Petroleum Products: The refinery will produce more petroleum products, meeting domestic demand and reducing reliance on imports.

Economic Growth: The agreement is expected to boost economic growth by saving the country billions of Naira in subsidy removal.

This partnership between the Federal Government, NNPCL, and Dangote Refinery marks a significant milestone in Nigeria's journey towards economic stability and growth.

Following NNPCL's recent fuel price increase, which saw pump prices surge to ₦1,030 per liter in Abuja, the Naira-for-crude agreement has been announced, offering a promising development amidst rising fuel costs.