What Dangote Refinery will save Nigeria
$16bn in forex revenues $10bn worth of domestic supplies of petroleum products
EXPECTATIONS CON TINUE TO be heightened over the mega refinery project that Africa’s richest man, Aliko Dangote, is putting up in Lagos, the commercial and financial capital of Nigeria, Africa’s largest economy by gross domestic product (GDP). The expectations are understandable. It is a project that holds a lot of promise for a country with one of the largest oil reserves in Africa and a top world exporter of crude oil, but which has found itself importing refined petroleum products to meet local needs.
For more than a decade its stateowned refineries located in Port Harcourt, Rivers state; Warri, Delta state, and Kaduna, Kaduna state, have been unable to supply the fuel its citizens need for domestic use, and the country has been drawn deeply into importing fuel for its population. For a country, which has earned a global appellation for corruption, fuel importation had offered a window for financial sleaze with a so-called subsidy regime that created some of the worst avenues for corruption in recent years. Over several years, trillions naira, which have been channelled into much needed social services, had been frittered away in the name of subsidy that was largely based on the differentials between the cost of landing the fuel in the country and the price it sold at the pumps.
The differentials were often arrived at because imported fuel was subjected to global crude oil prices as well as other costs, including transportation and bank interest charges on loans that importers with privileged licenses to bring in fuel often say they had to meet.
Many say the giant Dangote refinery project is a saving grace from the mess the country had been put through by politicians who often preferred to see the cash tills created by a corrupt subsidy regime instead of getting the state-owned refineries back working and producing fuel for citizens.
This is the backdrop on which the Dangote refinery project is being hailed. The savings to be made for the country are enormous, say those familiar with the situation. And only recently, Rama Rao Putta, the head of quality assurance and quality control of Dangote Oil Refinery Company Limited, disclosed a figure in the neighbourhood of $26 billion in annual savings for the country to be derived when the project comes on stream. That would be savings on fuel bills alone; but there would also be other socio-economic benefits, Putta said.
Already well recognised as the largest single train petroleum refinery project worldwide, with a capacity that will see it able to process 650,000 barrels per day of crude, it has become a project for which analysts across many divides, oil and gas, finance, insurance, manufacturing have been navel gazing on as they review their reports every so often.
The project is a mega intervention on Nigeria’s downstream petroleum sector, where there have been a lot of debates for years over its need of a shakeout. Government had lacked the will – political, stomach and economic wills – to carry out such a shakeout. A Petroleum Industry Bill (PIB) has been stuck at the National Assembly for more than a decade without any clear resolution in sight as to what the country’s politicians really want to do with its oil industry, an industry which is its cash cow, and for which its politicians have since lost their ability to think and drive proper policies to diversify the economy.
An attempt to break into parts for easy passage, what was seen as an over wieldy PIB, has not stopped it from still dragging at the National Assembly. Many say it is the reason why the country’s presidents often choose to keep the portfolio of petroleum minister because it is one where you need do nothing except worry about how much you have to distribute to other lazy politicians at the helm of affairs in state and local governments, who queue up at the federal capital, Abuja, where oil money is shared monthly, even those who contribute little to nothing to the commonwealth.
But many are relieved that the Dangote refinery is progressportation ing positively to the finishing line, which could be late 2019, 2020 and fully by 2021, according to one estimate by Renaissance Capital analyst, Temilade Aduroja, who covers sub-Saharan Africa for the firm.
Aduroja said that the progress shown by the company over the past year is “significant” and noted that “it might start in 2020 but the full operation is in 2021.”
The $12 billion refinery is also expected to increase the country’s net exports despite the diversion of 650,000 barrels per day from the country production to the refinery. “I think Nigeria’s net exports would increase based on that, although the crude might decrease because some of it would be going to the refinery, but Dangote is still going to export refined fuel,” Aduroja said.
She is quick to allay any fears about the country having lower crude exports as a result of the 650,000 barrels per day that Dangote’s mega refinery will consume.
“Nigeria’s OPEC cut is at 1.8 million barrels per day so we possibly might not be producing at full capacity. Also, Egina is coming at the end of the year, Bonga is coming in a few years, so obviously, Nigeria is going to continue producing, even though some go to the refinery,” she explained, adding that Dangote Refinery might import crude and does not have to get all its crude from Nigeria.
Last week, Dangote Refinery’s Putta was upbeat receiving a delegation of the Lagos Chamber of Commerce and Industry (LCCI) led by its president, Babatunde Ruwase.
Businesses and industries have as much being on the receiving end as have ordinary Nigerians. The failure to make petroleum products easily available to power and run industries have had a telling impact on members of the organised private sector, including LCCI, Manufacturers Association of Nigeria (MAN), and Nigerian Chambers of Commerce, Industry, Mines and Agriculture (NACIMMA); and the thought of Dangote Refinery company coming on stream offers an opportunity for which close monitoring to follow its progress members of the OPS often seize.
Ruwase’s team visited to have a first hand view of the complex with a tour of the Dangote jetty, refinery and fertilizer plants. Putta projected that the refinery would create 100,000 indirect employments through retail outlets, while helping to ease product availability in Nigeria.
The LCCI president expressed excitement at the progress of work on the site, describing as magnificent and spectacular the impact the Dangote Oil Refinery project would have on Nigeria’s downstream petroleum sector, and said it is billed as a game changer for the nation’s oil and gas sector.
He also used the opportunity to commend Aliko Dangote for the enormous investments he has made in Africa over the past years.
Said Ruwase: “Dangote’s patriotism remains unparalleled when it comes to investment and his investments in many sectors have been a key factor behind Nigeria’s improving economy. Dangote is doing so much to positively impact the lives of Nigerians through the production of household products”.
He also commended the company’s management for building a jetty to carter for the movement of heavy equipment to the refinery’s site, pointing out that the investment “will greatly reduce the congestion at Apapa port and also help to cut down traffic on Apapa road.”
He said the world is waiting for Dangote Oil Refinery project to bail Nigeria out from the clutches of im- of petroleum products.
“This project is the first of its kind. There is no investor in Nigeria that has developed the courage to come up with such gigantic project. From what we have seen today, we now have a better perception about the project.
From what we have seen on ground, it shows that the project is a reality and it is possible for Nigeria to become exporter of petroleum product,” he said.
Ruwase, therefore appealed to other investors to thread the pact of Dangote by investing heavily in the Nigerian economy, adding that nevertheless, Dangote’s patriotism remains unparalleled when it comes to investment and that his investments, in many sectors, have been a key factor behind Nigeria’s improving economy.
Dangote Refinery officials, including Putta revealed that the company has completed the training of the first and second batches of Nigerian engineers in India and that the employees were being acclimatized at site.
Anurag Jaiswal, general manager of Dangote Fertilizer Limited, described the fertiliser project as the largest granulated urea fertilizer complex coming up in the entire fertilizer industry history in the world.
Dangote is investing as much as $2 billion on the project which has capacity to handle three million tonnes yearly. Jaiswal said the impact on the economy of Nigeria and the entire region would be immense.
“This is going to be one of the largest single capacity complex in the world producing in total, 8,000 tonnes of urea daily. We’ll be having two trains of ammonia and two trains of urea and each train will produce 4,000 tonnes. So in a year it will be three million tonnes,” he further explained.
Jaiswal also noted: “It is much more expensive to import from abroad due to freight cost, but it will certainly be cheaper if you are importing from Nigeria.
It will have a huge impact on the Nigerian economy because we will be saving a lot of foreign exchange.”
The project is a mega intervention on Nigeria’s downstream petroleum sector, where there have been a lot of debates for years over its need of a shakeout