Dangote Refinery Expands Crude Oil Storage with Eight New Tanks

The Dangote Petroleum Refinery is constructing eight additional crude oil storage tanks to bolster its capacity for imported crude oil. This expansion will increase the refinery's storage capacity by 6.29 million barrels, equivalent to 1 billion liters, according to a report by Africa Report.

The $20 billion refinery’s decision to expand storage is driven by the unreliability of local crude supplies, as highlighted by officials. The Nigerian National Petroleum Company Limited (NNPC) has been unable to provide sufficient crude, prompting the refinery to rely on imports.

Increased Storage Capacity

The eight new tanks will raise the refinery’s crude storage capacity by 41.67%, bringing the total to 3.4 billion liters. Currently, the refinery has 20 storage tanks, each with a capacity of 120 million liters, amounting to 2.4 billion liters.

Devakumar Edwin, the Vice President in charge of the oil and gas business at Dangote Industries, explained the rationale behind the expansion:

“Importing crude from other countries instead of buying locally means that our crude stockpiles will have to be higher. So we have started building eight additional crude tanks to hold a billion liters, over and above our original storage capacity. Four of them are nearing completion.”

In addition to its crude oil storage, the refinery also has 2.34 billion liters of capacity for refined products.

Production and Market Supply

The Dangote refinery began producing diesel and aviation fuel in January 2024 and petrol in September 2024. Its products are supplied domestically and exported to several countries. 

However, Edwin described the current crude oil supply from NNPC as “still very low,” necessitating the shift towards imported crude.

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Challenges in Local Supply

Nigeria, Africa’s largest oil producer, has faced persistent challenges, including underinvestment, production outages, theft, and pipeline vandalism. These issues have caused significant losses in crude production, sometimes displacing Nigeria from its position as the continent’s top oil producer.

As of November 2024, the Nigerian Upstream Petroleum Regulatory Commission reported crude production at 1.45 million barrels per day (bpd), nearing the 1.5 million bpd OPEC quota.

Naira-for-Crude Initiative and Market Dynamics

In August 2024, President Bola Tinubu initiated a naira-for-crude deal, allowing local refineries, including Dangote’s facility, to purchase crude in naira. The initiative, which began in October, aimed to ensure a steady crude supply while reducing petroleum product prices.

Aliko Dangote, President of Dangote Industries, stated in December that the policy contributed to lower fuel prices in Nigeria. However, Dangote’s recent expansion in storage for imported crude suggests a gradual shift away from full reliance on the naira-for-crude arrangement.

FAQs

• Why is the Dangote refinery expanding its crude storage capacity?

The expansion addresses unreliable local crude supplies, prompting the refinery to rely on imported crude oil to meet its operational needs.

• How much additional storage is being added?

The refinery is constructing eight new tanks, increasing its crude storage capacity by 6.29 million barrels or 1 billion litres.

• How does the naira-for-crude deal impact the refinery’s operations?

The naira-for-crude initiative provided local refineries with access to crude oil in exchange for naira, reducing fuel prices domestically. However, recent developments indicate a potential shift back to importing crude oil.

• What challenges affect local crude oil supply in Nigeria?

Issues such as theft, pipeline vandalism, underinvestment, and production outages have disrupted local crude oil supplies, impacting refineries.

• What is the current production output of the Dangote refinery?

The refinery began producing diesel and aviation fuel in January 2024 and petrol in September 2024, with products distributed locally and exported internationally.