Dangote Refinery’s 1.4m-bpd expansion dependent on crude supply concerns

Dangote Petroleum Refinery and Petrochemicals FZE’s plan to double its refining capacity to about 1.4 million barrels per day is dependent on critical operational tests, details of the company’s operational projections contained in its share sale prospectus have shown.

The refinery aims to double its capacity by 2030 but could face challenges in securing adequate crude oil supplies to keep the expanded facility running at or near capacity, according to its initial public offering prospectus.

The refinery, which currently has a refining capacity of approximately 700,000 barrels per day, is undertaking an expansion programme that will add a further 700,000 barrels per day of capacity.

Dangote Refinery on Monday commenced its initial public offering (IPO), offering 4.1 billion ordinary shares at N525 per share to raise about N2.15 trillion to fund its expansion.

However, the company’s prospectus identified the availability and timely supply of crude oil as a key risk to its operations, warning that disruptions could affect its ability to maintain throughput at or near design capacity.

“The Issuer is dependent on the adequate and timely supply of crude oil, and disruptions to crude supply could affect Refinery operations,” the refinery stated.

The company said its refining operations require a continuous and reliable supply of crude oil, noting that any interruption, delay or reduction in availability could affect its ability to operate efficiently.

Reliance on domestic and international crude

The prospectus showed that Dangote Refinery currently relies on both domestic and international sources to meet its crude requirements.

In 2025, approximately 60 per cent of the refinery’s crude feedstock was sourced from Nigeria through term contracts with NNPC Limited, including under the Federal Government’s crude-for-naira programme, as well as spot purchases from international oil companies and domestic producers.

The company also has access to crude supply volumes of up to 350,000 barrels per day under the Domestic Crude Supply Obligation (DCSO) framework, although it said the volumes are subject to availability.

The remaining crude requirements are sourced through the international spot market and supply arrangements with international counterparties.

The prospectus also revealed that the refinery had processed 36 different crude grades from Africa, South America, the United States and the Middle East as of 30 June 2026, indicating the range of crude sources and grades available to the facility.

But the company cautioned that having multiple supply arrangements does not eliminate the risk of disruption.

“Although the Issuer has entered into supply arrangements and may source crude from multiple suppliers, there can be no assurance that such arrangements will ensure uninterrupted supply of crude oil to the Refinery,” Dangote Refinery said.

Crude-supply challenge

According to the refinery’s prospectus, its expansion plan involves increasing refining capacity alongside the development of supporting infrastructure and ancillary facilities.

The programme is expected to be implemented over five years, with completion targeted by 2030, and capital expenditure estimated at approximately $14.3 billion.

The company plans to use the net proceeds of its IPO to finance part of the expansion programme, with net proceeds of about N2.11 trillion expected after estimated offer expenses are deducted.

The balance of the expansion cost will be funded progressively through internally generated cash flows and other financing sources, including debt, trade and project financing arrangements.

This means the ability to secure crude supplies will be an important operational consideration as the company commits further capital to increasing its processing capacity.

In its prospectus, the refinery warned that inadequate crude supplies could have direct financial consequences for the business.

It noted that if the company is unable to secure sufficient volumes of crude at competitive prices, or if supply disruptions result in operations below design capacity, the refinery could experience reduced throughput, higher production costs and weaker refining margins.

“If the Issuer is unable to secure adequate volumes of crude oil at competitive prices, or if supply disruptions result in operations below design capacity, this could lead to reduced throughput, increased per-unit production costs and reduced refining margins,” Dangote Refinery said.

It further warned that such developments could materially affect the company’s business, financial condition, results of operations and prospects.

The company identified other factors that could disrupt crude availability, including supplier failures to deliver contracted volumes, operational disruptions in upstream production, export controls, domestic allocation restrictions, and security incidents affecting oil-producing areas.

International sourcing

Dangote Refinery’s international sourcing strategy provides an alternative to domestic supplies but also identifies risks in the global oil market.

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The company noted in its prospectus that crude availability and prices can be affected by production and policy decisions by NNPC, the Federal Government, OPEC and other oil-producing countries.

It also faces transportation and shipping risks when importing crude, including security incidents in the Gulf of Guinea and disruptions around major international shipping routes.

Meanwhile, the refinery’s Chief Executive Officer, David Bird, said at the listing ceremony on Monday that the company’s business model was built around maintaining low costs and resilience during downturns while remaining safe and reliable enough to benefit from upturns.

“Our business model is to be low-cost and resilient during downturns, safe and reliable to harvest the upturns.

“And in our last six months of full capacity, full utilisation at capacity has been a demonstration that we’ve been able to harvest the attractive margins of recent months,” Mr Bird said.