Dangote Oil Refinery, a company owned by the Nigeria-based Dangote Group, which is set to add the largest refining capacity in the world this year, will be the biggest winner as oil refiners struggle to keep up with demand globally.
The price of global refined products is soaring – even more than crude oil itself – as demand for those refined products is proving too much for refiners to keep up with, according to a new analysis by Vortexa.
Aliko Dangote, Chairman of Dangote Group says its 650,000 barrels per day (bpd) integrated refinery and petrochemical project under construction in the Lekki Free Zone near Lagos, Nigeria, will begin operations in the third quarter of this year (2022).
Mechanical work on the refinery is complete and “hopefully before the end of third quarter we should be in the market,” Dangote, chairman of Dangote Industries Limited, said in a briefing at the plant site in Lagos, last month.
The facility which will cost an estimated $19 billion to build, is expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility, upon completion.
The Dangote Refinery will be coming on stream just as most refiners in Asia and Europe enter their refining maintenance season in the second quarter (Q2).
But so far, Vortexa says, there is no indication that those refineries have plans to ramp up production ahead of maintenance season to provide a cushion to survive turnaround.
Inventories of refined products are now near historic lows—and given the refining maintenance season that will soon be upon Asia and Europe, it doesn’t look that those historical lows are going to ease substantially.
What this means is that today’s tightening may soon grow even tighter.
The Dangote refinery will process a variety of light and medium grades of crude to produce Euro-V quality clean fuels including gasoline and diesel as well as jet fuel and polypropylene.
It has the capacity to supply Nigeria’s entire refined fuel needs meaning it has room for exports, to the African and other global markets.
Around the world, spare refining capacity is not widely available.
According to Vortexa, Japan is one of the few countries with refining capacity to spare, but even Japan has, over the last two months, increased run rates by 40% compared to June 2021.
Mexico has some spare capacity as well, but it hasn’t tapped that capacity in years, and China has spare capacity, but China’s spare capacity is tightly controlled by the Chinese government.
This leaves Dangote as the biggest winner in a tight global market, according to MoneyCentral’s analysis.