Dangote Refinery: Hope For Petroleum Sector, Economy
03.21.2022 - NEWS

March 21, 2022 [Leaderchip] – Nigeria’s hopes of attaining self-sufficiency in domestic oil refining is hinged on the completion of the Dangote refinery.

 

It will be one of the largest in the world and when fully operational, should in theory be able to meet Nigeria’s domestic fuel requirements and trigger a positive ripple effect across other sectors of the economy.

Nigeria is the largest oil and gas producer in Africa. Crude oil from the Niger delta basin comes in two types: light, and comparatively heavy; the lighter around 36 gravity and the heavier, 20 – 25 gravity. Both types are paraffinic and low in sulfur. Nigeria’s economy and budget has been largely supported from income and revenues generated from the petroleum industry since 1960.

Meanwhile, over the last four decades, Nigeria has consistently struggled to keep its refineries functioning optimally. Despite having a nameplate refining capacity that exceeds demand, Nigeria ranks as the third highest importer of petroleum products in Africa, importing over 80 per cent of products consumed.

In spite of the setbacks, the inherent opportunity for Nigeria’s erstwhile dormant refining sector holds bright prospects for the future and a recognition of key drivers will accelerate the imminent refining revolution.

Statistics as of February 2021 shows that the Nigeria’s oil sector contributes to about nine per cent of the entire country’s GDP. Nigeria as the largest oil and gas producer in Africa, is a major exporter of Crude oil and petroleum products to the United States of America. In 2010, Nigeria exported over one million barrels per day to the United States of America representing nine per cent of the U.S total crude oil and petroleum products imports and over 40 per cent of Nigeria exports.

The need for holistic reforms in the Petroleum Industry, ease of doing business, and encouragement of local content in the industry birthed the Petroleum Industry Bill by the Goodluck Jonathan administration on July 18, 2008.

Dangote Petroleum Refinery

angote Oil Refinery is a 650,000 barrels per day (BPD) integrated refinery project under construction in the Lekki Free Zone near Lagos, Nigeria. It is expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility.

The Pipeline Infrastructure at the Dangote Petroleum Refinery is the largest anywhere in the world, with 1,100 kilometers to handle 3 Billion Standard Cubic Foot of gas per day. The Refinery alone has a 400MW Power Plant that is able to meet the total power requirement of Ibadan DisCo.

The Refinery will meet 100 per cent of the Nigerian requirement of all refined products and also have a surplus of each of these products for export. Dangote Petroleum Refinery is a multi-billion-dollar project that will create a market for $11 Billion per annum of Nigerian Crude. It is designed to process Nigerian crude with the ability to also process other crudes.

Benefit Of Dangote Refinery To Nigeria Economy

With the Dangote Refinery promised to come on board in third quarter (Q3), 2022 to produce more than 100 million liters of PMS daily, not only will Nigeria save the above whopping sum, but the country will have virtually the entire West African sub-region, in whose market Nigeria’s Dangote will benefit from trade creation, in economics parlance.

The Dangote Refinery is also expected to address Nigeria’s reliance on the importation of petroleum products such as fuel and diesel.

The president of Dangote Group, Aliko Dangote, has revealed its refinery subsidiary will commence processing of crude oil in the third quarter of 2022.

Dangote said that mechanical work on the refinery has been completed, noting that the plant will start with a processing capacity of 540,000 barrels a day and subsequently commence full production maybe by the end of 2022 or the beginning of 2023.

Dangote said, “Mechanical work on the refinery is complete and hopefully before the end of third quarter we should be in the market. The plant will start with a processing capacity of 540,000 barrels a day. Full production can start maybe, by the end of the year or beginning of 2023.”

He added that the fertiliser and petrochemicals plants were capable of generating $2.5 billion annually while the refinery would serve Nigeria and other countries across the world.

Dangote Group’s executive director and president of Manufacturing Association of Nigeria (MAN), Engr Mansur Ahmed, assured Nigerians that the upcoming Dangote Petroleum Refinery will help address the volatile fuel crisis in the country.

Ahmed, at the 43rd Kaduna International Trade Fair, said the president of Dangote Group, Alhaji Aliko Dangote is passionate and desirous of changing the trajectory of the African economy through industrialisation.

He said the refinery, which is due to commence operations later in the year will also impact positively on the Nigerian economy, as it will help conserve foreign exchange and create jobs en masse.

The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, said completion of Dangote Refinery would transform the Nigerian economy from a net importer of refined petroleum products to a net- exporter of petroleum products.

President of the African Development Bank (AfDB), Akinwumi Adesina recently described Dangote Refinery and Fertiliser projects as the best industrialised project to happen to Africa.

He said these projects, which are far beyond the expectation of his team and himself, would positively affect the economic growth and development of not only Nigeria but Africa as a continent.

He described Aliko Dangote as an enigma, who should be honoured in Africa and even beyond for his passion, vision and determination to develop and ensure that Africa, as a continent, is out of the poverty circle; with his aggressive employment generation scheme across most African countries.

According to him, one of the things I admire the most about Alhaji Dangote is that, he actually believes in Nigeria, and he invests his money in Nigeria. He believes in Africa and invests in Africa. Nobody could invest the type of billions of dollars that is here, unless the person not only has the vision but also the commitment and passion for his country. We are extremely proud of you and of your commitment to the continent.

“Aliko is quite an inspirational and visionary business leader and for anybody to have done what I have seen here. I see a company that I will proudly call Africa’s growth accelerator company. With this project, we see an acceleration of how to reduce imports. We see an acceleration on how to have an outbound on export; a value chain development and how to compete regionally and globally.”

He added that “These projects will reverse the huge sum the nation spends on foreign exchange, when you look at how much we import, it is about $57 billion worth of different products and we export only about $50.4 billion, so we have to balance that with about $7 billion and talking to them here, they showed us that they can have a domestic market of about $11 billion and that is an incredible market and that will save Nigeria about $9 billion dollars, a year from importing petroleum products, so this is huge for Nigeria and even for Africa as a continent.”

In its Nigeria Economic Outlook Report for 2022, the Centre for the Promotion of Private Enterprise (CPPE), an economic advocacy group, identified Dangote Petroleum Refinery as one of the key expected drivers of growth that would impact positively on the downstream oil sector of the Nigerian economy in 2022.

The chief executive officer, Dr. Muda Yusuf, said the activation of the Petroleum Industry Act (PIA) in 2022 and the coming on stream of the Dangote Refinery were expected to impact positively on the economic outlook, saying “We expect to see positive outcomes as investor sentiments in the oil and gas sector improve on account of the reforms anchored on the PIA.

Local Content

Dangote Refinery announced that so far it has awarded a total of $368 million contract to 120 local contractors. Through this, the company said, it is contributing its quota to the Nigeria content development initiative. Dangote Refinery added that more opportunities would be presented as time unfolds.

The Nigerian Content Development Monitoring Board (NCDMB) is optimistic that Dangote Refinery will boost local content policy with its 650,000 barrels per day project under construction. The local content development initiative entails companies awarding contracts to Nigerian contractors with the aim of building local capacity.

Dangote Oil Refinery has thrown its weight behind the NCDMB to promote the critical issue of Research and Development (R&D) in the oil and gas sector of the country.

The local content legislation and policies in Nigeria’s Oil and Gas industry is the key priority for the industry players and the government. As it is expected of a Productive Development Policies (PDPs), the Nigeria Content Development Act (NCACT) was enacted by the National Assembly of the Federal Republic of Nigeria on April 22, 2020, under the authority of the Nigeria Content Development and Monitoring Board (NCDMB). The NCDMB goal is to monitor, coordinate and implement the Nigeria oil and gas industry Content Act (2010), in regulation with the Petroleum Act (PA), Petroleum Profit Tax Act (PPTA), Petroleum Drilling and Production Regulations (PDPR), and Deep Offshore and Inland Basin Production Sharing Contract Act (DIPSA).

The executive secretary, NCDMB, Engr. Simbi Wabote, expressed the need for companies in the Nigeria Oil and Gas sector to start nurturing the growth of the country’s home-grown technology rather just being wholesome consumers of other people’s innovations.

More so, research and development play a vital role in the advancement of the Nigerian Oil and Gas Industry. Dangote refinery is expected to be the Africa’s biggest oil refinery and the world’s biggest single-train facility, upon completion.

The Dangote refinery will process a variety of light and medium grades of crude to produce Euro-V quality clean fuels including gasoline and diesel as well as jet fuel and polypropylene. The integrated refinery and petrochemical project is expected to generate 9,500 direct and 25,000 indirect jobs.

In conclusion, Nigeria’s refining sector is currently not operating at full potential and laudable attempts are being made by President Muhammadu Buhari’s administration to drive private investment. These include plans to upgrade existing refineries. The 650,000 bpd Dangote refinery is a crucial development within the sector, at optimal utilisation, the refinery is capable of meeting the country’s demand, and at full capacity, the Refinery is set to be the largest refinery in Africa and the largest single-train refinery in the world. It will put Nigeria in the spotlight for crude oil refining, competing with world refining superpowers in countries such as the United States, China and Saudi Arabia.

The refinery alone is set to outproduce Nigeria’s three major refineries; the Kaduna, Warri, and Port Harcourt refineries with a combined nameplate capacity of 445,000 bpd. The locally refined petroleum products will not only serve the Nigerian market (thus reducing the forex expended on importation of these products) but will also serve international markets, earning more forex for the nation.

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