…Middle East oil-product supplies have cratered since the start of the war, choking off vital diesel and jet fuel shipments to Europe, and Dangote has stepped in to help fill the gap
Billionaire Aliko Dangote’s giant refinery in Nigeria is running at full capacity and maximising supplies of diesel and jet fuel to Europe to benefit from surging profit margins.
“Right now we’re very much maximising our diesel, but the jet is still extremely significant from a yield perspective,” David Bird, chief executive officer of Dangote Petroleum Refinery and Petrochemicals FZE, said in an interview. “Rest assured you’re going to see a massive amount of aviation fuel still making its way to Europe.”
Middle East oil-product supplies have cratered since the start of the war, choking off vital diesel and jet fuel shipments to Europe, and Dangote has stepped in to help fill the gap.
Africa’s largest refinery reached full production shortly before the start of the US-Israel war on Iran on February 28, putting it in a position to help replace disrupted fuel supplies to Europe while cashing in on soaring margins. The timing also demonstrates its profit potential ahead of its Sept. 14 initial public offering, Africa’s biggest share sale.
Maximising production of fuels like diesel is especially attractive for refiners right now, with the premium the fuel fetches over crude at the highest in at least 15 years.
“We are running flat out at 700 000 barrels a day right now as we speak,” Bird added, touting the refinery’s capability to run the gamut of crude grades and to prioritise the fuels that the market deems most valuable.
The business has been taking advantage of skyrocketing demand for diesel that’s driven prices to record levels, and Dangote can quickly fine-tune the proportion of products it makes from crude, Bird said.
The growth strategy Dangote has outlined ahead of the listing includes doubling refining capacity to 1.4 million barrels a day by building a second crude processing unit at the site by 2029.
Sourcing that amount of crude, currently just under Nigeria’s entire daily output, won’t be a problem, according to Bird. The refinery has processed Cawthorne, a new domestic grade of oil, and recently used supply from the United Arab Emirates, while West Africa alone pumps enough to keep it supplied, he said.
“We’ve got 3.5 million barrels a day of crude production in our backyard,” he said.
The company is “extremely bullish” on refining margins over the medium term, but would be concerned if the Iran war drags on indefinitely, Bird said.
“It’s a supply crisis and at some point demand has to equal supply,” he said. “We don’t want that demand destruction. That won’t be beneficial to anyone.”
SOURCE: moneyweb.co.za