Dangote Refinery Faces Crude Supply Woes Amid NNPC Dispute

Aliko Dangote, Chairman of Dangote Refinery, erred in depending on the Nigerian National Petroleum Company (NNPC) Limited for crude supply, said Olabode Sowunmi, a consultant to the Nigerian parliament on gas and power, at the Continental Energy Investment Forum 2024 in South Africa.

“Dangote made a mistake in the calculation which most businessmen shouldn’t do,” Sowunmi stated. “In terms of the supply chain, the reliance on crude oil was solely on the local company, NNPC. Consequently, he was forced to buy crude oil from outside Nigeria.”

The $20 billion mega-refinery has increasingly imported US crude oil, transporting barrels across the Atlantic. According to Bloomberg data, Dangote has purchased over 16 million barrels of West Texas Intermediate crude oil this year.

NNPC had previously agreed to acquire a 20 percent stake in the refinery, committing to deliver 335,000 barrels per day to secure this stake. However, recent financial reports indicate that shipments of Nigerian crude in December and January fell significantly below this rate, according to trader data compiled by EnergyPlanets. These deliveries occurred as the refinery was still ramping up production.

Data reveals that NNPC’s 20 percent stake in Dangote Refinery, valued at $2.76 billion, was facilitated by a $1.036 billion funding from Lekki Refinery Funding Limited, with $1 billion paid to Dangote Refinery and $36 million covering transaction costs.

However, Dangote claims that NNPC has failed to meet its obligations, resulting in the state-owned oil company’s stake in Dangote Refinery being reduced to 7.2 percent from the initially reported 20 percent.

“NNPC no longer owns a 20 percent stake in the Dangote Refinery. They were meant to pay their balance in June but have yet to fulfill the obligations. Now, they only own a 7.2 percent stake,” Dangote stated to media executives at the refinery site.

In response, NNPC denied claims that it failed to meet its payment obligations to increase its stake in the refinery to 20 percent from 7.2 percent.

“As a company, NNPC periodically assesses its investment portfolio to ensure alignment with our strategic goals,” the state-owned oil company said in a release. “The decision to cap our equity participation in the Dangote Refinery was made several months ago, and we informed the Dangote Refinery at that time.”