By Teddy Nwanunobi
The Nigerian National Petroleum Corporation (NNPC) is said to be in advanced talks with Dangote Industries to acquire a 20 per cent stake in the 650,000- barrel per day (bpd) Dangote Refinery.
“Negotiations have reached an advanced stage. We are hoping to wrap up the negotiations before the refinery goes on stream.
“This is a deliberate move to ensure that the risk associated with refinery business does not weigh solely on Dangote Industries, and also a bold statement that the government is ready to encourage private investors in the building refineries,” a company source was quoted to have said on Thursday.
S&P Global Platts reported that some Nigeria-based industry sources said that the refinery might still struggle to come on stream until late 2022, or early 2023 as the delays caused by COVID-19 continue to slow down the project.
S&P Global Platts had reported the Dangote plant located in the outskirt of Nigeria’s commercial capital Lagos – which will be Africa’s largest refinery – is expected to start commissioning early next-year, Devakumar V.G. Edwin, an executive director at Dangote Industries.
Edwin said on March 1 that overall progress is now 90 per cent complete, including design, engineering, and procurement, with construction work around 70 per cent complete.
But not everyone is convinced that the refinery will be ready by next year.
This refinery is critical for Nigeria, which relies heavily on fuel imports for its needs.
The Nigerian government has pinned its hopes of ending gasoline imports largely on the completion of the Dangote Refinery
Nigeria imports around 1 million-1.25 million mt/month of gasoline due to inadequate domestic refining capacity.
All the refineries, with combined nameplate capacity to refine 445,000 bpd of crude oil, are currently shut down.
The imports come at a cost to Africa’s largest producer, which has endured a choppy 2020 due to the oil price crash and the pandemic.
NNPC has been looking to reform the country’s downstream sector for almost a decade now, but progress has been slow.
But NNPC recently started repairs of Nigeria’s Port Harcourt Refinery last month, after the necessary financing was secured.
It is now working on getting funding for the overhaul of the other plants.
NNPC says it expects them to operate at around 90 per cent of capacity when repairs are completed, and they resume production by 2023.
The refineries have operated sporadically due to years of neglect, forcing Africa’s largest crude producer to rely heavily on imports to meet its domestic fuel needs.
NNPC’s Managing Director, Mallam Mele Kyari, recently said that Africa needed an “efficient refining sector, and massive investment was needed” for the region to become self-reliant.
The global refining sector did not look very attractive because of falling margins and fragile oil demand, but the picture in Nigeria looks rosier.
Oil demand in Africa is poised to grow at a faster pace than most of the world in the next two decades, increasing by 3.1 million bpd between 2020 and 2040 due to the doubling of the car fleet along with increased demand for LPG as a cooking fuel, according to the International Energy Agency (IEA).
The demand growth in the continent is higher than the projected growth in China and second only to that of India.
The start-up date of this refinery has been repeatedly delayed, after the company first announced the project in 2013.
The crude distillation unit has been designed to process 12 crudes at one time and has been engineered to process three Nigerian crude grades – Escravos, Bonny Light and Forcados.
The plant will yield 327,000 bpd of gasoline, 244,000 b/d of gasoil/diesel, 56,000 bpd of jet fuel/kerosene, as well as 290,000 mt/year of propane/LPG when fully operational, according to a Dangote presentation given at an industry event last year.
It will also produce 830,000 mt/year of polypropylene, 600,000 mt/year of slurry, 290,000 mt/year of propane and 38,000 mt/year of sulfur.
The refinery received most of its key refining units, such as the columns that make up the plant’s crude distillation unit reactor, regenerator and fluid catalytic cracker, in 2019.