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Friday, March 24, 2023

Dangote Refinery to Transform Global Tanker Trade in Crude, Products

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The massive new Dangote Refinery in Nigeria is set to further transform tanker trades whenever it comes online, Gibson Shipbrokers said.

The broker said the 650,000 barrel per day refinery, in Lekki east of Lagos is set to come online at some point in the first half of 2023 with implications for both crude and product tankers.

According to Gibson, “whilst there are still uncertainties regarding the timescale of the start-up of the refinery, there are also many unknowns regarding the future tanker sector demand that will go alongside the start-up of this new facility. One thing is for sure, the Dangote refinery will have a dramatic impact within the domestic Nigerian market as well as the wider tanker sector.”

Nigeria’s National Oil Company NNPC will supply at least 300k b/d of crude to the 650 k b/d refinery. This is a bold move as it will bolster domestic supply security to the new refinery and guarantee an outlet for the country’s crude.

“West Africa helped to offset the halt in Russian crude flows into Europe with shipments to European destinations increasing by nearly 200,000 barrels per day in 2022,” shipbroker Gibson said in its latest weekly report.

“The Dangote refinery has been designed to process 12 crudes with a focus on three Nigerian grades – Escravos, Bonny Light and Forcados. With NNPC supplying at least half the crude throughput, the question remains where will the other 50% be sourced from? Apart from neighbouring West African producers, the US would be an obvious source, as well as various North Sea grades. This will potentially put Nigeria in a position of importing crude. While there is some uncertainty as to where the additional crude will come from, what is certain is that there will be a drop in the volume of exported volumes, which will have a knock-on effect on the tanker trade market.’

Gibson notes that, around 70% of Nigerian crude exports are loaded on Suezmaxes.

An average of around 35- 40 Suezmax cargoes are loaded each month. Assuming that NNPC do supply at least their agreed volumes, this could reduce the number of Suezmaxes loading in the country by around 9-10 vessels per month.

“In addition, Nigeria exports significant volumes of crude to India, Spain, South Africa and Northern Europe. If domestic crude is diverted for the new refinery, then these countries will have to substitute the lost volumes from alternative sources, which may well come from further afield,” Gibson said.

The new refinery will be the largest in Africa and the world’s largest singletrain facility when completed.

The plant will produce 327 k b/d of gasoline, 244 k b/d of gasoil/diesel and 56 k b/d of jet fuel/kerosene. Once fully operational it is expected to be able to fulfil the products demand of Nigeria.

This will transform the country from a net importer of products to potentially enabling it to become an exporter.

“This will mean that there will have to be an adjustment within the product tanker trade sector as well. Significant volumes of gasoline and other products are sourced from Northern European and Indian refineries. These trades are likely to come under major downward pressure once the new Dangote refinery ramps up operations,” the shipbroker added.

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