- Aliko Dangote, Africa’s wealthiest individual, is strategically planning to establish an oil trading arm, possibly in London, to oversee the supply chain for his massive 650,000 barrel-per-day refinery in Nigeria. This move is anticipated to reshape global dynamics in the oil and fuel industry.
- Major trading entities, including BP, Trafigura, and Vitol, are in negotiations with Dangote to provide financing and crude oil for his refinery.
Africa’s wealthiest individual, Aliko Dangote, is in the planning stages of establishing an oil trading arm, potentially situated in London, to oversee the supply of crude oil and products for his new refinery in Nigeria. Six sources familiar with the matter disclosed this development to Reuters, signalling a strategic shift that could reshape global oil and fuel dynamics.
The colossal 650,000 barrel-per-day refinery is poised to profoundly impact oil and fuel trade, drawing attention from major trading entities worldwide. Notable players such as BP, Trafigura, and Vitol have engaged in negotiations with Dangote, both in Lagos and London, seeking to provide financing and crude oil in exchange for product exports. These firms aim to support the refinery, requiring approximately $3 billion in working capital.
However, negotiations have faced hurdles as Dangote is cautious about the potential loss of control and profits associated with loan repayments through fuel exports. Despite meetings with state-backed firms to secure cash and crude, no agreements have been reached thus far.
Dangote has enlisted the expertise of former Essar trader Radha Mohan to lead the envisaged trading arm. The team is in the process of recruiting two additional traders. Although the refinery has processed around 8 million barrels of oil between January and February, reaching full capacity will take several months.
In the interim, Vitol has proactively prepaid for some product cargoes to facilitate the refinery’s crude purchases, while Trafigura has engaged in crude oil swaps for future fuel cargoes, according to sources with insider knowledge.
Note that a noteworthy development occurred in December 2023 when the Nigerian National Petroleum Company Limited (NNPCL) decided to alter the pricing mechanism for its crude cargo. Previously based on Dated Brent’s average settlement in the five days post-loading, NNPCL will now price its supplies against the monthly average of Dated Brent, a change deemed by traders as potentially introducing higher risk in handling the nation’s crude barrels.
This adjustment adds an additional layer of complexity to the evolving landscape of Nigeria’s oil trade.