Africa’s wealthiest individual, Aliko Dangote, is venturing into new territory by exploring the creation of an oil trading arm, potentially based in London, to facilitate operations for his upcoming refinery project in Nigeria, insiders disclosed. This strategic move has the potential to sideline major global trading entities, currently in lengthy negotiations to financially back Dangote’s refinery and supply crude oil in exchange for product exports. The anticipation is palpable within the trading community as Dangote’s colossal 650,000-barrel-per-day refinery gears up to reshape global oil and fuel dynamics.
According to reliable sources speaking to Reuters, Dangote seems prepared to take control of the situation. The newly proposed trading division is expected to be led by Radha Mohan, a former Essar trader who assumed the position of director of international supply and trading at Dangote in 2021, as per his LinkedIn profile. It is understood that the team is actively recruiting additional traders to strengthen its ranks.
The construction of the refinery, a nearly decade-long project, incurred costs of approximately $20 billion, surpassing the initial budget by $6 billion. Despite these challenges, the facility has commenced operations, refining an estimated 8 million barrels of oil between January and February. However, achieving full operational capacity will necessitate several more months.
To support the refinery’s crude procurement, Vitol reportedly pre-paid for specific product cargoes, while Trafigura engaged in crude oil swaps for future fuel cargoes, according to informed sources. Both Vitol and Trafigura, headquartered in Geneva, declined to provide official statements.
This bold move by Dangote to establish his own oil trading arm reflects his determination to navigate the complex landscape of global oil trade independently. By potentially setting up the headquarters in London, he strategically positions the trading arm in a key financial hub. This shift could disrupt the existing dynamics where major global trading entities play a crucial role in supporting refinery projects.
The appointment of Radha Mohan, with his background as a former Essar trader, indicates a deliberate choice to bring in expertise from the industry. The team’s active recruitment efforts further underscore the seriousness of Dangote’s commitment to building a formidable trading division.
The financial intricacies surrounding the refinery project, including the initial cost overrun of $6 billion, highlight the challenges faced during the lengthy construction period. However, the commencement of operations and the refined oil output in the initial months indicate progress despite these hurdles.
The involvement of Vitol and Trafigura in supporting Dangote’s refinery underscores the significance of established global players in the oil trading arena. Their pre-payment and crude oil swap strategies demonstrate the creative financial mechanisms employed to ensure a stable crude supply for the refinery.
As Dangote’s oil trading arm takes shape and the refinery inches towards full operational capacity, the global oil and fuel landscape is poised for significant shifts. The success of this venture could solidify Dangote’s position not only as a major player in the African business landscape but also as a formidable force in the global oil trade.