The Dangote Refinery, with a capacity of 650,000 barrels per day, has raised alarms over the future of Europe’s 90 existing refineries. According to a Reuters report on Wednesday, this newly built refinery in the Lekki Free Zone, Lagos, could disrupt a fuel trade from Europe to Africa valued at $17 billion annually.
Unnamed analysts and traders have voiced concerns that the Dangote Refinery is already increasing competition pressure on European refineries. Eugene Lindell, the head of refined products at consultancy FGE, highlighted the challenge, stating, “The loss of the West African market will be problematic for a small set of refineries that do not have the kit to upgrade their gasoline to European and U.S. specification,” referring to the stringent environmental standards in those regions.
Data from Kpler indicates that approximately a third of Europe’s average fuel exports of 1.33 million barrels per day in 2023 were destined for West Africa, with Nigeria being the primary recipient. Kpler analyst, Andon Pavlov, warned that 300,000 to 400,000 barrels per day of refining capacity in Europe are at risk of closure due to rising global gasoline production.
A Report showing a forecast by a European refinery executive pointed out that coastal refineries focused on exports are more exposed, while inland refineries, which rely on local demand, are less vulnerable. “The changes won’t happen overnight, but they could ultimately lead to closures of refineries and their conversion to storage terminals,” he noted, reflecting on the challenging market environment.
Pavlov specifically mentioned that the UK’s Grangemouth and Germany’s Wesseling refineries might face early closures due to the looming oversupply of gasoline and subsequent pressure on refining margins expected later this year.
