Dangote Refinery Developments
Dec. 8, 2023
A Suezmax tanker carrying 950,000 barrels of Agbami crude from Nigeria has been reported en route to Lekki, the nearest land port to Dangote’s offshore crude receiving terminal. This marks the first crude feedstock for Nigeria’s 650k b/d Dangote refinery, a sign that fuel production at the new facility is finally starting to ramp up after years of delays. The crude distillation unit has been designed to process 12 crude grades at one time and has been engineered to process three Nigerian crude grades -- Escravos, Bonny Light and Forcados. Once fully operational, the plant will yield approximately 300,000 b/d of gasoline, 244,000 b/d of gasoil/diesel, 56,000 b/d of jet fuel/kerosene, as well as 290,000 mt/year of propane/LPG, according to S&P.
Alongside declining crude production due to lack of investment, the surging regional crude demand will notably tighten crude balances and thus result in less crude exports. This will put downward pressure on VLCC and Suezmax demand for exports to Europe and the Far East.
On the CPP tanker side, the 300k b/d gasoline output at full capacity is equivalent to approximately two-thirds of WAFR’s existing light distillate imports, which historically were largely sourced from Europe. Indeed, McQuilling forecasts LR2 ton-mile demand from Northern Europe to WAFR will fall by 25% in 2024 on an annualized basis, according to our August Mid-Year Update. However, this development will be net bullish for LR tankers due to the further sailing distances for European gasoline exports, notably to Southeast Asia. We forecast 2024 ton mile demand from Northern Europe to the Far East and Southeast Asia to grow by 85% and 148%, respectively, year-over-year. There is also potential for WAFR naphtha balances, another byproduct of the refining process, to reach 17,000 b/d by the end of 2024 (Kpler). These additional quantities could be exported to Asian countries, providing further tailwinds for CPP tanker earnings in the next few years.
Figure 1: Regional Refining Capacity & WAFR Crude Balances
Source: Kpler, JBC
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