In its latest assessment, Kpler said the permanent shutdown of refining capacity in advanced economies has structurally altered supply dynamics, tightening product balances and increasing reliance on a small number of late-cycle mega refineries to stabilise markets.

The firm estimates that close to 900,000 barrels per day of refining capacity west of the Suez Canal has been permanently removed, eroding the buffer that once helped absorb shocks and outages.

This loss of capacity has had far-reaching consequences. With fewer refineries operating, any disruption now has a greater impact on prices and availability, keeping margins elevated for much of the past year.

Kpler noted that the Atlantic Basin has been particularly affected, as Europe’s shrinking refining footprint has increased dependence on large, complex plants designed to serve regional demand.

“The Atlantic Basin enters 2026 at a structural inflection point,” Kpler said, pointing to the permanent closure of nearly 800,000 barrels per day of refining capacity across Europe and North America.

The report added that the market’s ability to rebalance increasingly depends on the normalisation of two late-cycle mega refineries, Nigeria’s 650,000 barrels per day Dangote refinery and Mexico’s 340,000 barrels per day Dos Bocas facility.

Despite this strategic importance, Kpler said Dangote’s influence has so far been more limited than initially expected. While the refinery has made progress in commissioning units and supplying Nigeria’s domestic market, it has yet to operate at the scale required to significantly shift regional product flows.

According to the report, unresolved mechanical issues at the refinery’s residue fluid catalytic cracking unit, its core conversion system, have capped utilisation at around 60 to 65 per cent. This has constrained Dangote’s ability to fully capitalize on refinery shutdowns in Europe and North America, even as global fuel markets remain tight.

Still, Kpler stressed that the closures in the West mean the stakes around Dangote’s performance are now higher than originally anticipated. The firm described a major corrective shutdown at the Nigerian plant as a pivotal moment. If successfully executed, it could allow the refinery to move from marginal participation to structural relevance in clean fuel balances from mid 2026.

At full utilisation, Kpler estimates that Dangote could add roughly 300,000 barrels per day of gasoline, 150,000 barrels per day of gasoil, and about 140,000 barrels per day of jet fuel to the market. Such volumes would be significant at a time when Europe’s refining capacity continues to shrink, and global markets remain exposed to supply shocks.

Dangote expansion plans

Beyond its current operations, Dangote is also pursuing ambitious expansion plans. Last year, Aliko Dangote, president of the Dangote Group, announced that the refinery would be upgraded to a capacity of 1.4 million barrels per day, making it the largest refinery in the world.

That ambition was reinforced last week when the refinery’s managing director, David Bird, said the expansion could be completed within three years. Bird disclosed that the facility has already supplied about 50 million litres of petrol to the market and now operates around the clock to ensure steady fuel delivery.

In a further boost to the project, Engineers India Limited confirmed that it will lead the expansion as the project management consultant and as the engineering, procurement, and construction management consultant.

The Indian state-owned firm said it has signed a contract worth more than $350 million with the Dangote Group for the upgrade, which will lift capacity from 650,000 barrels per day to 1.4 million barrels per day.

For global energy markets, and particularly for Africa, the implications are substantial. As Europe and North America retreat from refining, attention is increasingly focused on a handful of mega projects capable of filling the gap.

Whether Dangote can overcome its operational challenges and scale up in time may help determine how tight fuel markets remain in the years ahead. (Business Insider Africa)

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