In a striking development that highlights the complexities of the global oil trade, Indian refineries are purchasing Nigerian crude oil while the Dangote Petroleum Refinery in Nigeria is increasingly relying on imports from the United States. This “oil trade irony” has been noted by oil sector operators, who point to the significant differences in crude oil sourcing strategies between Indian refiners and Africa’s largest refinery.
According to industry sources cited by Reuters, Indian Oil Corporation recently acquired one million barrels of Nigeria’s Agbami crude for September delivery, valued at a tender awarded to global trader Trafigura. This purchase is part of a broader effort by Indian refiners to secure millions of barrels from non-Russian sources, following pressure from the US to halt purchases from Russia. In fact, Indian state refiners had largely avoided the spot market since 2022, instead opting for cheaper Russian crude after Russia’s invasion of Ukraine. However, they paused Russian purchases in late July after US President Donald Trump expressed concerns.
Meanwhile, the $20 billion Dangote Petroleum Refinery in Lagos is relying heavily on US imports to feed its processing units, despite a naira-for-crude deal with the Federal Government. Data from commodities analytics firm Kpler shows that US barrels accounted for about 60% of Dangote’s 590,000 barrels per day of crude intake in July, with Nigerian grades making up the remaining 40%. This marks a significant shift, as US crude has overtaken Nigerian supply for the first time amid ongoing domestic sourcing challenges. The refinery’s crude imports surged to a record 590,000 barrels per day in July, driven largely by US barrels.
The Dangote refinery’s reliance on US imports can be attributed to several factors, including the competitive pricing of West Texas Intermediate (WTI) crude, which is often more cost-effective than Nigerian grades like Bonny Light. Additionally, the refinery’s configuration is optimized to process light sweet crude, which is abundant in the US. According to experts, the predictability and stability of US crude supply also play a crucial role in Dangote’s sourcing decisions, allowing the refinery to maintain uninterrupted production.
Aliko Dangote, President of the Dangote Group, has attributed the refinery’s increasing reliance on US imports to the low supply of domestic crude oil. Despite the government’s efforts to support local refineries through the Domestic Crude Supply Obligations policy, Dangote and other refineries have struggled to secure sufficient domestic crude. As a result, the refinery has adopted a more flexible sourcing strategy, prioritizing commercial incentives over domestic supply.
The development has significant implications for Nigeria’s oil industry, as local producers continue to face challenges in meeting production targets. Nevertheless, there are signs of growth, with companies like Seplat working to boost output and new infrastructure projects underway. As the global oil trade continues to evolve, it remains to be seen how Nigeria’s oil industry will adapt to these changing dynamics.
