Report: Foreign oil companies offer loan to Dangote refinery in exchange for fuel

Foreign oil traders are offering loans to provide working capital for Dangote refinery in exchange for fuel from the plant.

According to a report by Reuters on Tuesday, Aliko Dangote is planning to set up an oil trading arm, likely based in London, to help run crude and products supply for his new refinery in Nigeria. 

The move, the report said, would reduce the role of the world’s biggest trading firms, which have been negotiating for months to provide the refinery with financing and crude oil in exchange for product from Dangote refinery.

“The giant 650,000 barrel-per-day refinery is set to redraw global oil and fuel flows and the trading community is closely watching the way it will operate,” Reuters said.

Citing sources, the report said BP, Trafigura and Vitol, among others, have met with Dangote in Lagos and London in recent weeks to offer loans for the refinery’s estimated $3 billion working capital the refiner needs to buy large amounts of crude.

According to the publication, Dangote has also met state-backed firms in his search for cash and crude.

The report said Dangote worries the involvement of the international trading firms would lessen his control of the business and profit, so no deal has been signed.

“He is going to try and do it himself,” an industry source told Reuters.

The new trading team, the report said, would be managed by Radha Mohan, a former Essar trader. 

“He joined Dangote in 2021 as director of international supply and trading, according to his LinkedIn profile. Two sources said the team was in the process of hiring two new traders,” the publication said.

The refinery took nearly a decade to complete — and cost $20 billion, which is $6 billion above budget.

The plant refined around 8 million barrels of oil between January and February, according to Reuters, and will take months to reach full capacity.

Sources said Vitol has already prepaid for some product cargoes to assist the refiner in purchasing crude, while Trafigura has swapped some crude oil for future fuel cargoes.

Dangote refinery did not reply to Reuters’ requests for comment.