OPEC Says Dangote Refinery, Others to Threaten Existing Refineries

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Dangote refinery with 600,000 barrels per day capacity alongside other smaller refineries coming online from Egypt and Algeria are expected to threaten existing refineries in Africa and the rest of the world, the Organisation of the Petroleum Exporting Countries (OPEC) stated.

The cartel disclosed this in its latest 2020 World Oil Outlook report.

OPEC estimated that the world’s refining capacity would increase by 5.2 million barrels per day between 2020 and 2025 based on the ongoing and announced refinery projects.

“Significant capacity additions are also expected in Africa in the medium-term period. Additions of new refining capacity are clearly in line with oil demand growth expectations, which show positive trends in most developing countries,” the report stated.

In Africa, the report stated that about 0.8 million barrels per day or 15 percent of the current global volume is the additional refinery capacity expected from Africa.

It said, “The largest project expected to come online is the Dangote refinery in Nigeria in 2022, as well as several smaller projects in Egypt and Algeria.

“This significant increase in refining capacity is somewhat larger than incremental demand in the medium-term and could help to reduce product imports, especially in West Africa.”

The report also noted that in Africa and Latin America there were old inefficient refineries with low utilisation rates.

It said, “The new refining capacities, which are projected to come online in the medium to long-term, may increase pressure on these existing plants with two ways out – either closure or refurbishment.

“Both markets are expected to grow considerably, which would support refurbishment of older plants. However, due to the lack of financing and rising internal competition, some of these plants may be closed in the coming years.”

However, OPEC said the COVID-19 crisis may slow down some refinery projects, therefore shifting commissioning dates.

“Furthermore, the uncertainty is even higher for projects in the second half of the medium-term period. Consequently, it is possible that some projects expected to go online in the medium-term period may become operational only after 2025,” it added.

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