New Refineries in West Africa
May 17, 2024
The continued refinery ramp-up in West Africa (mainly Dangote) has started to impact tanker demand and created new trade lanes in the Atlantic Basin. According to S&P Global, the Dangote refinery has secured crude supply at only 300k b/d of the max capacity at 650k b/d from the Nigeria’s national oil company NNPC, which lead us to believe the gap will be fulfilled by other light grades including imports from the US. Since the beginning of this year, we have captured four VLCCs and one Suezmax have been sailed/booked to import US crude to Dangote (Gem No.1, Maran Mira, Otis, Oceanis and Kondor). In April, we noted the Maran Mira chartered by PetroChina floating off Nigeria while the refinery delayed issuing a letter of credit to the Chinese trader, raising concerns of future sales of US crude to Dangote. Meanwhile, as the Dangote refinery adopts straight-run approach in the 1H of 2024, the expanded naphtha balance has resulted in exports to the Far East; one example being the 2019-built Hafnia Triton that carried 80kt of naphtha from Dangote to Japan at $3.2 million as total freight.
The 2H of 2024 could find another round of change in trade flows after catalytic reformers are installed, which further refine naphtha into gasoline. We anticipate the LR1 benchmark trade in the West, UKC>WAFR, to find growing pressure in tanker demand. With European refiners losing the gasoline outlet, overall margins could be significantly pulled by the underperforming gasoline cracks resulting in a reduction in runs. However, the impact on CPP tanker demand is expected to be marginal, as gasoline from Europe to be exported to much further destinations (ton-mile demand) offsetting the reduction in cargo volume. Naphtha exports from Dangote should also simultaneously reduce after the operation of these catalytic reformers.
Figure 1 – WAFR Refinery Capacity Ramp-Up Figure 2 – WAFR CPP Exports
Source: McQuilling Services, Kpler
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