Dangote Refinery
Dangote Refinery

BY EMEKA EJERE

With the high capacity Dangote Oil Refinery nearing completion, it is expected that Nigerians may soon join their counterparts in other oil-producing nations to reap the benefit rather than suffer the cost of rising global oil price.
Nigerians have been bitter in the past few weeks because while other oil-producing countries rejoice at the rebound of oil prices after the all-time low caused by COVID-19, the reverse is the case in Africa’s largest crude producer.

This is because as prices of crude rise globally, the price of petrol at filling stations in Nigeria rose astronomically, with no safety net. Only recently, prices went as high as N212, with some filling stations evens selling at higher prices.
Nigeria has the 10th largest crude reserves in the world, yet imports refined petroleum products and is reported to have spent at least N10 trillion (over US$26 billion) on petrol subsidy in 12 years.

While there have been attempts to remove petroleum subsidies, the moves have been largely unsuccessful, culminating in the eventual subsidy removal by President Buhari last year—a move that also did not last long. But available records show that the problem goes beyond removal of petroleum subsidies.

The country currently exports at least 1.5 million barrels per day of crude. Research by the Nigeria Extractive Industries Transparency Initiative (NEITI) shows that in 2018, Nigeria earned US$32.6 billion from crude sales; with peak prices now, more revenue is expected.

Yet, with no functioning refineries, the country continues to export unrefined crude, which gets sold back at a premium as petroleum products, with all the attendant costs of production, shipping, demurrage, security, as well as the exporter’s profit factored into it.
The effect is that the downstream marketer who sells the products in Nigeria will do so at cost plus, making the average Nigerian end user pay high prices for the products, unless the federal government subsidizes it, which in turn also takes up a large share of the budget, depriving other sectors of development funding and deepening poverty.

Experts say were crude to be refined in Nigeria, the shipping cost would have been eliminated thus lowering price. This, perhaps, is the gap Nigerians expect the Dangote Refinery to fill as their only hope in the nearest future.

Even the Independent Petroleum Marketers Association of Nigeria (IPMAN), shares the optimism that the $18 billion Dangote Refinery will boost the country’s foreign investment and crash the price of petrol and other fuels when it finally comes on stream.
Accordingly, the Major Oil Marketers Association of Nigeria (MOMAN) last week expressed interest to lift refined petroleum products from the Dangote Refinery.

The Dangote Group in a statement posted on its website on Sunday and obtained by the News Agency of Nigeria (NAN) in Lagos, said the marketers made the request during a recent visit to the site of the refinery in Ibeju-Lekki, Lagos.
It said the marketers, who toured the 650,000 barrels-per-day refinery, expressed the belief that it would help remove the various bottlenecks associated with the importation of petroleum products into the country.

The Chairman of MOMAN, AdetunjiOyebanji said, “It is our desire to see our members buy refined products from Dangote refinery when it comes on stream. We are open to discuss commercial terms with the management of Dangote Oil Refinery regarding lifting of refined products. The turnaround time is going to be much faster. It will be more efficient.”

He said getting products from the refinery would also give the major marketers the possibility of getting the product by vessels or trucks.
“It is going to have a positive impact on the way we do business in the downstream sector. Hopefully, we believe Dangote refinery is going to result in delivering decent margins for our members; enough margins for us to begin to rebuild or/upgrade the assets in the industry,” he added.

Oyebanji, who expressed hope that the coming on stream of refinery would facilitate the deregulation of the downstream oil sector, noted that the refinery would move Nigeria from an import-dependent nation to self-sufficiency in petroleum products
The Chief Operations Officer, Dangote Oil Refining Company, Giuseppe Surace, told the marketers that the refinery had been designed to process a variety of light and medium grades of crude, including petrol, diesel, jet fuel and polypropylene.

In July 2017, major structural construction began at the project site, and Dangote Group estimated that the refinery would be “mechanically complete” in late 2019 and commissioned in early 2020.

Estimated to cost about $18billion, the refinery will produce Euro-V quality gasoline and diesel, as well as jet fuel and polypropylene. Upon completion, it is expected to be Africa’s biggest oil refinery and the world’s biggest single-train petroleum facility.

Business Hallmark learnt that the Dangote Refinery, which was 75 percent near completion as of March, 2020, had its completion date moved to 4th quarter of 2020 because of coronavirus pandemic.

The refinery will be able to process 650,000 barrels of crude oil per day into refined petroleum products, thereby placing Nigeria on the list of oil refining country, not just an oil exporter. Nigeria currently imports most of its refined petroleum due to lack of domestic refining capacity in the country.

However, experts say with the Dangote facility, Nigeria’s refining capacity will double and help in meeting the increasing demand for fuel while providing cost savings.

The Petroleum Products Pricing Regulatory Agency (PPPRA) last year stated that Nigeria imported 19.2 billion litres of petroleum products in 2019, while the country’s refineries produced only 166.33 million litres of Premium Motor Spirit (PMS) also known as petrol, in 2019.

Consequently, the Nigerian National Petroleum Corporation (NNPC) noted that the federal government paid N752bn as petrol subsidy in 2019, equivalent to 62 percent of the amount spent on capital expenditure in the year (N1.2trn).

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