Can Dangote break the myth of private refinery?

The story of the Dangote refinery broke early this year with sketchy detail because it left many questions unanswered, such as, when? how? where? Some of the officials of the company couldn’t provide such details when contacted by journalists.
Last week, however, some questions were answered by the initiator of the project – Alhaji Aliko Dangote, President Dangote Industries Limited (DIL). According to him, his company will sign a $3.3 billion loan agreement with a consortium of local and foreign banks on September 4 (today) in Abuja for the construction of the 400,000 barrels per day (b/d) refinery, petrochemical and fertilizer complex that will cost $9.05 billion.
Dangote, told newsmen that the group of banks, comprise Standard Chartered Bank, Standard Bank of South Africa and some local banks, that will provide a greater part of the $3.3 billion.
Giving a breakdown of the cost of the project, he said Dangote group would be bringing in $3.5 billion as its equity contribution; the banks – $3.3 billion; while export credit agencies and development finance institutions would provide $2.25 billion to construct the multi billion dollar complex, which will be first of its kind in Nigeria and the largest in Africa.
He said on completion in 2016, the refinery would produce the equivalent of 20 million metric tonnes of petroleum products, comprising gasoline (commonly known as petrol), diesel, aviation fuel/kerosene, some fuel oil and heavy distillates such as flurry, which he explained is a raw material for carbon black that can be used for the production of tyres.
The petrochemical plant will produce polypropylene for industries while the fertilizer facility will produce 2.75 million metric tonnes of urea and ammonia for the agriculture sector.
Observers believe that with this huge amount expected from the banks and other development partners it is clear sign that these projects are far from myth, because banks don’t invest in what they are not sure of.
If these projects succeed, Dangote‘s name will be written in the book of history as the first person that built Africa’s largest refinery in Nigeria. Not only that, in the last 15 years several licenses were given by government to construct or establish refinery to private firms but none of them has come to fruition.
Energy and economic analyst, Mr Samuel Johnson, said with the entrance of Dangote into the petrochemical and oil and gas refining business, Nigerians will soon have respite in the crises-ridden downstream petroleum sub-sector.
“This is a terrain loathed by most investors who at one time or the other have been given licenses to commence business in that critical sector of the nation’s economy but failed, citing the existing subsidy regime as the basis for their reluctance to put their license to use.
“Whatever the myth around the petroleum refining industry which made other investors see importation of the products as a better investment sense than going into local refining, Dangote has now proved them wrong and removed the veil by venturing into it”, Johnson said.
The loan to be signed today with the banks is $3.30 billion, about N528 billion, arguably the largest in the history by Nigerian banks for one project.
“By this singular act, both Dangote and Nigeria banks have proven once again that Nigerians can create value to the domestic economy. It is risk taking to stimulate Nigeria’s economy as opposed to other investors with undiluted appetite for importation as only business option”, Johnson added.
According to him, just as we experienced before in the cement industry, where local demand then far outweighed supply, before Dangote’s intervention. To meet up with national consumption demand, government has consistently cited fuel importation as a major setback for the economy, therefore at the completion of the refinery, petrochemical and fertilizer complex, national supply would have been upped by 100 per cent.
The current production capacity of four Nigerian refineries is 440,000 bpd, when the Dangote project commences operation, it means the refinery can produce much closer to what the four nation’s refineries can produce at installed capacity.  Though due to age and neglect of the government refineries, most of them are now producing below 50 percent installed capacity. It would then mean that Dangote is closing the gap created by that national deficiency, dwindling local refining capacity supply and more population demand.
Reports say work has already commenced on the construction of the plants with the fertilizer plant being sited in Edo and the petrochemical and petrol refining plants situated at OKNLG Free Trade Zone bordering Ogun and Ondo states.
Dangote also revealed recently that the contract for the refinery and petrochemical plant had been awarded to UOP, a subsidiary of Honeywell International, a Fortune 500 company and US-based conglomerate that specializes in consumer products, engineering services and aerospace systems.
The project manager for the refinery and petrochemical plant is India Engineers Limited, an Indian government-owned company credited with the setting up of refineries in India while the contract for the fertilizer plant had been awarded to oil and gas contractor, Saipem, a subsidiary of Italy’s Eni, which already has a presence in Nigeria.
Giving the details of the project regarding the scope of the project and the production capacities of the various plants, Dangote indicated that the fertilizer plant is designed with a capacity to produce 2.75 million MTPA of ammonia and urea; the refining plant with overall capacity of 400,000 bpd and the petrochemical plant to produce poly propylene to the tune of 600,000MTPA
The refining and petrochemical plants, he stated further will be the largest in Africa and have been designed to produce Euro 5 quality standard as compared to the Euro 3 currently supplied in the Nigerian market. On completion, he stated the refined products output would be gasoline (PMS) of 7.684 million MTPA; diesel-5.30 million MTPA; Jet fuel/kerosene-3.740 million MTPA; LPG-0.213 million MTPA; and slurry/fuel oil-0.625 million MTPA.
“This is our contribution to the present government’s economic transformation agenda and it forms part of our expansion initiatives of his group which size has in the last five years increased 10-fold to a market capitalization of $22 billion.
“It is on record that this administration has helped create and maintain the enabling environment that has encouraged us to invest over $6 billion in the Nigeria cement manufacturing industry in the last seven years.
 “We are happy to inform you that we are not resting on our oars as we, through this letter, want to inform you of our recent decision to make possible what could.”
Dangote expressed happiness that due to the vastly improved investor friendly environment in Nigeria, there was a tremendous response by reputable international finance organizations to participate in the loan syndication.
But analysts are of the view that apart from the removal of bottlenecks created by fuel importation and its attendant corruptive tendencies, the job opportunities would remain unquantifiable as direct and multiplier effect of jobs to be created would engage over 25, 000 people. Thus poverty will be reduced and standard of living of many shored up.
It’s our hope that coming on stream of the projects will eliminate fuel scarcity, kerosene shortage and other problems associated with availability and affordability of petroleum products in the country. By opening up competition and bring more private sector to the downstream oil sector.

Download Daily Trust News App

Get it on Google Play
Share this article

Join us on

Join our whatsapp group here for Breaking News, Exclusives , others

Complain about a story or Report an error and/or correction: +2348189301900 (Whatsapp and SMS only) Email:

DISCLAIMER: Comments on this thread are that of the maker and they do not necessarily reflect the organizations stand or views on issues.