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Dangote Refinery

Dangote Refinery

Dangote Refinery: Nigeria inaugurated the Dangote Refinery with the aim of transforming the country into a net exporter of petroleum products.

However, analysts have expressed concerns that securing an adequate supply of crude oil could cause delays in achieving full production this year.

The Nigerian government, under President Muhammadu Buhari, sees the refinery as a solution to the persistent fuel shortages experienced in the country, including during the recent presidential election in February.

Nigeria spent $23.3 billion on importing petroleum products last year and consumes approximately 33 million litres (8.7 million gallons) of petrol daily. The Dangote Refinery has the capacity to process 650,000 barrels of crude oil per day.

The refinery plans to export excess petrol, thereby establishing Nigeria as a significant hub for petroleum product exports in Africa. Aliko Dangote, Africa’s wealthiest individual and the funder of the refinery’s construction, has also stated intentions to export diesel.

A worker walks past structural parts of an under construction oil refinery plant at Dangote refinery in Ibeju Lekki district, on the outskirts of Lagos, Nigeria August 7, 2019. Picture taken August 7, 2019 [Temilade Adelaja/Reuters]

A worker walks past structural parts of an oil plant under construction at Dangote Refinery in the Ibeju-Lekki district of Lagos, Nigeria on August 7, 2019 [Temilade Adelaja/Reuters]

The construction of the massive petrochemical complex, reportedly the world’s largest single-train refinery, cost $19 billion and experienced nearly a decade of delays, surpassing initial cost estimates of $12-14 billion. The refinery currently has outstanding debt of around $2.75 billion, according to Nigeria’s central bank governor.

In addition to the refinery, the complex includes a 435-megawatt power station, a deep seaport, and a fertilizer unit.

During the commissioning ceremony, Aliko Dangote emphasized the priority of increasing production to meet Nigerian demand entirely and eliminate the country’s dependence on fuel imports.

However, there are concerns regarding the availability of crude oil supply. Dangote anticipates commencing crude refining in June, but experts from London-based research consultancy Energy Aspects suggest that full operations may start later this year, with a gradual ramp-up extending into 2025.

The refinery requires a steady supply of crude oil, but Nigeria’s oil production has been declining due to factors such as oil theft, pipeline vandalism, and underinvestment. In April, production fell below one million barrels per day, lower than Angola’s output.

The decline in production could affect the ability of the Nigerian National Petroleum Corporation (NNPC), the state-owned oil company and a 20% stakeholder in the refinery, to fulfil its commitment to supply 300,000 barrels per day of crude oil to the Dangote Refinery.

Economist Kelvin Emmanuel, who authored a report on oil theft, explains that NNPC relies on production-sharing agreements with major oil companies, such as ExxonMobil, Shell, and Eni, to access crude oil, which is often traded for petrol and diesel.

The Dangote Refinery has not yet signed agreements to purchase crude oil directly from these oil majors in Nigeria. As a result, Dangote may need to import crude oil from traders like Trafigura and Vitol, potentially undermining the goal of local refining to conserve foreign exchange and maintain lower fuel prices.

Despite these challenges, Energy Aspects believes that the Dangote Refinery has the potential to eventually eliminate Nigeria’s petrol deficit, reshape the petrol market in the Atlantic basin, and export diesel that meets European Union specifications.

Dangote Refinery: Jobs Opportunity

The President of The Dangote Group, Aliko Dangote, says his refinery would generate “massive” direct job opportunities for Nigerians.

He disclosed this on Monday in Lagos during the landmark commissioning of the 650,000 barrels per day Dangote Petroleum Refinery and Petrochemicals by President Muhammadu Buhari.

The refinery is expected to produce Premium Motor Spirit (PMS), diesel (AGO), aviation jet fuel and Dual-Purpose Kerosene (DPK), among other refined products.

“The refinery operation will generate massive job opportunities in their hundreds of thousands,” he said while highlighting the benefits of the refinery.

“The refinery will make available to our industries vital raw materials to a large range of manufacturers in the pharmaceuticals, food, beverages, construction and many other industries.”

The refinery is the largest in the African continent.

In his speech, Aliko Dangote stated that their primary objective, beyond the commissioning ceremony, is to increase the production of various petroleum products to meet Nigeria’s demand for higher-quality products this year.

He emphasized the importance of eliminating the country’s dependence on imported petroleum products and preventing the entry of sub-standard products into the Nigerian market.

Furthermore, Dangote expressed their intention to run the plants at maximum capacity and efficiency, enabling them to competitively export to other markets, particularly within the Economic Community of West African States (ECOWAS) and other regions where the majority of countries rely on imports to meet their petroleum product needs.

Dangote highlighted the project as a significant opportunity for Nigeria, aligning with the African Union’s vision of establishing an African common market through the African Continental Free Trade Area (AfCFTA).

The Dangote Refinery is designed to produce various refined products, including Premium Motor Spirit (petrol), diesel (Automotive Gas Oil), aviation jet fuel, and Dual-Purpose Kerosene (DPK), among others.

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Tadese Faforiji

I am Tadese Faforiji, a history student of the prestigious Adekunle Ajasin University, Akungba-Akoko, Ondo State- 21st-century University, properly called. I am a blogger and an avid writer.