The Dangote Group, known for its ambitious Dangote Refinery, is poised to begin crude oil production shortly. Reports from S&P Global Commodity Insights indicate that the company aims to kick off operations at its two oil assets in Nigeria’s Niger Delta region during the fourth quarter of 2024.

After facing significant challenges in securing crude supply, the Dangote Group plans to initiate production at its two upstream projects in Oil Mining Leases (OMLs) 71 and 72. Initial production is expected to reach approximately 20,000 barrels per day, with plans to increase output in the first quarter of 2025.

According to sources, the company is currently in the market for a floating production, storage, and offloading (FPSO) vessel that can handle up to 650,000 barrels of crude. Dangote holds an 85% stake in West African E&P Venture, which possesses a 45% working interest in the two OMLs, while the state-owned Nigerian National Petroleum Company (NNPC) holds a 55% interest.

First E&P, a Nigerian upstream player, also partners in operating OMLs 71 and 72. These licenses are located in shallow waters southeast of the Niger Delta, just 22 kilometers from the Bonny terminal, and encompass the Kalaekule and Koronama oilfields.

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Discoveries in these blocks date back to 1966, with Shell commencing production two decades later. While output peaked at 21,000 barrels per day in 1999, it experienced a decline starting in 2003. Nonetheless, the fields are estimated to still contain recoverable resources of nearly 300 million barrels of oil and approximately 2.3 trillion cubic feet of natural gas.

The upcoming production startup at OMLs 71 and 72 indicates that the Dangote refinery could soon mitigate its crude supply challenges, having struggled for several months to secure enough local crude. This $20 billion facility, which became operational in January, launched its residue catalytic cracker in early September, allowing for high-volume gasoline production as it stabilizes.

Designed to reduce Nigeria’s reliance on imported refined products, the refinery has thus far produced various fuels, including gasoline, diesel, jet fuel, and naphtha for both domestic use and export. However, the plant has had to import significant amounts of WTI Midland crude from the U.S. to meet its needs, leading to disputes between the NNPC, international oil companies, and Nigerian upstream regulators.

Recent data indicates that in September, Dangote sourced nearly 200,000 barrels per day of Nigerian crude and has not imported any U.S. crude since mid-July. To address its crude needs, the company is exploring opportunities to acquire oil from other producers, including those in Libya, Senegal, and Brazil. However, sources caution that the NNPC may only be able to meet 60% of Dangote’s crude requirements.