Dangote Oil Refinery, with a production capacity of 650,000 barrels per day, is poised to disrupt the $17 billion annual gasoline trade from Europe to Africa. As the largest refinery in Africa, Dangote’s entry into the market could put pressure on European refineries already facing closure due to increased competition. This development marks a significant milestone in Nigeria’s quest for energy independence, as the country currently imports most of its fuel due to a lack of refining capacity.
Europe’s gasoline exports to West Africa, particularly Nigeria, accounted for about a third of the region’s total exports in 2023, according to Kpler data. However, with the Dangote Refinery now operational, European refineries that lack the capability to upgrade their gasoline to meet more stringent environmental standards for other markets may face challenges.
The potential closure of 300-400,000 bpd of refining capacity in Europe looms as global gasoline production continues to rise, warns Andon Pavlov, an analyst at Kpler. The Dangote Oil Refinery’s significant output and its ability to meet domestic demand in Nigeria have the potential to reshape the dynamics of the global oil industry. With Nigeria being Africa’s most populous nation and top oil producer, the refinery’s success could contribute to the country’s economic growth and reduce its reliance on fuel imports.
The completion of the Dangote oil refinery, which cost $20 billion to build, marks a turning point for Nigeria’s energy independence. With plans to reach full capacity this year or next, the refinery’s impact on the European gasoline trade is expected to be substantial. As Nigeria takes steps towards self-sufficiency in fuel production, the broader implication is on the global oil industry and the future of European refineries.
According to an executive from a European refinery, coastal refineries that heavily rely on exports may be more exposed to the changes brought by the Dangote Refinery, while inland refineries that cater to local demand may be less vulnerable. The executive also mentioned the possibility of refinery closures and their conversion into storage terminals due to the challenging market environment.
Pavlov believes that the UK’s Grangemouth and Germany’s Wesseling refineries could potentially close ahead of schedule due to an anticipated gasoline oversupply and the resulting pressure on refining margins.
Franck Dema, the CEO of Petroineos, highlighted the energy transition and declining demand for fossil fuels as factors influencing the decision to shut down Grangemouth next year. Similarly, Shell cited its commitment to reducing carbon emissions as a reason for the planned closure of the Wesseling refinery.
Shell declined to comment on whether its plant could close ahead of schedule. The evolving market conditions and the energy transition are clearly impacting the decisions and operations of refineries in Europe.
