If you asked someone where U.S. crude oil shipments would go when the Obama administration ended the ban on most crude exports in December 2015, it’s not likely that Nigeria would have come to mind. Yet this year marked the second time since the restrictions ended that U.S. oil has been sent to the OPEC member, this time to feed its long-awaited Dangote refinery. In today’s RBN blog, we will examine this development and the prospects for more U.S. exports to the West African nation.
Before we dive into Nigeria’s emerging appetite for U.S. crude, let’s look at how we got to where we are today. U.S. crude oil exports have climbed by leaps and bounds since 2015, only retreating at the onset of the pandemic in 2020. Exports rebounded thereafter to set fresh records in 2023 at just over 4 MMb/d. Grades from across America’s onshore shale basins and the Gulf of Mexico have set sail to more than 50 countries. For top-buyer Europe, U.S. oil has become a go-to source since Russia’s invasion of Ukraine more than two years ago. Although quality issues have flared up occasionally, catching buyers off guard, the industry has seemingly addressed them in turn, limiting adverse impacts to demand.
To the U.S. oil producer, the repeal of the export ban probably felt like the greatest development since the Ford Model T. They no longer needed to rely almost exclusively on domestic buyers, and as U.S. production continued its upward trajectory (while demand from domestic refineries plateaued), the ability to access export markets took on added importance. As noted in our weekly Crude Oil Gusher report, domestic production reached as high as 13.3 MMb/d earlier this year and has held steady at 13.1 MMb/d over the last several weeks, up from 9.2 MMb/d in January 2016, the month after the export ban was lifted. That’s an increase of nearly 4 MMb/d — roughly the same volume currently exported.
Next, let’s look at the Dangote refinery. As shown in Figure 1 below, the 650-Mb/d plant is in the Lekki Free Zone of the coastal, oil-rich state of Lagos in southwestern Nigeria. Its owner is Africa’s richest man, Aliko Dangote, who runs the Dangote Group and its investments in a wide variety of businesses, including commodities, cement and real estate. The proposal to build the Dangote refinery, with its giant single crude unit, was announced over a decade ago, with startup initially scheduled for 2016. But like Mexico’s Olmeca refinery (aka Dos Bocas; see Here I Go Again), the Dangote project has been plagued by multiple delays and cost overruns. Major construction only started in 2017, and production of diesel and aviation fuels didn’t begin until January 2024.
Figure 1. The Dangote Refinery near Lagos, Nigeria. Source: RBN
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