The 650,000 per day capacity Dangote Refinery has been reported to have threatened the continued operations of Europe’s existing 90 refineries.
Reuters on Wednesday also reported that Dangote refinery which was built at the Free Zone in Lekki, Lagos may lead to the closure of a decades-long fuel trade from Europe to Africa worth $17 billion a year.
It reported that unnamed analysts and traders have expressed concerns that that the refinery is already exerting pressure on European refineries because of heightened competition.
Consultancy FGE’s head of refined products, Eugene Lindell said, “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.” He was referring to more stringent environmental standards for other markets.
Kpler’s analyst, Andon Pavlov,opined that as much as 300-400,000 bpd of refining capacity in Europe is at risk of closure because of rising global gasoline production.
A European refinery executive who preferred not to be named said coastal refineries that are geared for exports will be more exposed while inland refineries are less vulnerable because they rely on local demand.
He said: “The changes won’t happen overnight, but they could ultimately lead to closures of refineries and their conversion to storage terminals,” referring to the challenging market environment.
Pavlov said the UK’s Grangemouth and Germany’s Wesseling refineries could close ahead of schedule as a result of looming gasoline oversupply later this year and consequent pressure on refining margins.