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Africa’s largest petroleum refinery, a game changer for Nigeria’s dependence on foreign products

Photo: Nigeria’s first private and Africa’s largest petroleum refinery begins production and expected to save Nigeria from dependence on imports. Photo from Dangote Group of Company’s Website

The $19.5 billion Dangote Refinery and Petrochemical in Lagos, Africa largest and first private facility in Nigeria, has started production after it stocked six million barrels of crude oil, a major win for Nigeria’s long search for alternative to importation of refined petroleum products.

Nigeria which started crude oil production since 1951 is one of world’s major crude oil and gas producers and a major exporter of crude oil and unfortunately also a major importer of refined petroleum products which drains its foreign earnings.

The West African nation with a population of 200 million people and with vast arable land and with huge oil and gas reserve, remained import dependent because its four state-owned refineries – in Warri, Port Harcourt and Kaduna – had been grounded for more than two decades.

Heaving a sigh of relief, the country sees Dangote refinery which construction started in 2016 as a major game changer in the petroleum industry.

The country sees the refinery’s local production as life line to save some $10 billion in petroleum products import annually; create hundreds of thousands of direct and indirect jobs’ as well as pep up the economy.

The 650,000 barrels per day (bpd) capacity industry which was inaugurated by Muhammadu Buhari in May 2023 before leaving office as President on May 29, started production on Friday, Jan 12, 2024 eight months after it was commissioned.

For now, the refinery produces diesel, aviation fuel and kerosene and will be be fully operational later in the and pump products into local market and also service neighbouring countries of Chad, Niger, Cameroon, Benin, Togo and Ghana.

Occupying a land area of 2,635 hectares, the refinery will start by refining 350,000 bpd and build up to full production of 650,000 bpd later in 2024 but, would in the coming week, start up the crude distillation unit, which is a major component to produce Kerosene, jet oil, and diesel.

Mr Anthony Chiejina, Group, Head, Corporate Communications, Dangote Group, confirmed the commencement of production in a statement released in Lagos, quoting the President of Dangote Group, Mr Aliko Dangote, to have commended President Bola Tinubu for his support and encouragement.

“This production, as witnessed, would not have been possible without his visionary leadership and prompt attention to details.

“His intervention at various stages cleared all impediments, thereby accelerating the actualisation of the project. We also thank the various agencies in the petroleum industry. These organisations have been our dependable partners in this historic journey,’’ the 66-year-old African richest person, said.

“We have started the production of diesel and aviation fuel, and the products will be in the market before the end of the month. This is a big day for Nigeria. We are delighted to have reached this significant milestone.

“This is an important achievement for our country as it demonstrates our ability to develop and deliver large capital projects. This is a game changer for our country, and I am very fulfilled with the actualisation of this project.’’

Former President Buhari described the completion of the project as a significant milestone for Nigeria’s economy and a game changer for the downstream petroleum products market in the entire African region.

‘‘We must create necessary conditions for our private sector to grow and partner with the public sector to accelerate economic growth across the continent.

‘‘We must not allow outside powers to use some of our leaders to destabilize our economic and political trajectory,’’ he said.

The products of the refinery are designed to meet the highest quality standards and high-value products including Premium Motor Spirit (PMS), Automotive Gas Oil (Diesel), Aviation Turbine Kerosine (ATK); all of Euro V Standards that will enable us not only meet our Country’s demand but also to become a key player in the African and global market, Dangote said during the commissioning of the factory.

”Our coastal location and offshore loading and offloading (SPM) facilities with a capacity to receive all our crude oil supplies and evacuate up to 75% of our liquid products give us direct access to the rest of Africa and the global market for exports. In addition, 80 percent of our production can be discharged through trucks nationwide.”

He disclosed that the huge investment of over $19.5 billion in this industry was prompted by the company’s desire to support and contribute its quota to the Federal Government’s sustained effort to transform the economy and reposition Nigeria as the leading nation in Africa, and a respected member among emerging economies in the world.

According to him, apart from ensuring a consistent supply of high-quality fuels for the transportation sector, the refinery will provide essential raw materials to a wide range of manufacturing sectors, including plastics, pharmaceuticals, food and beverages, packaging, construction, and more.

He further stated that the refinery’s operation and related businesses would generate a substantial number of job opportunities, while the downstream supply and distribution of its products would significantly contribute to the absorption of labour, potentially benefiting hundreds of thousands of individuals.

”Once our plant is fully on stream, we expect that at least 40% of the capacity will be available for export and this will result in significant Foreign Exchange inflows into the country.

According to him, the accomplishment is to enable Nigeria to eliminate what he described as the tragedy of import dependency and stop — “once and for all” — toxic, substandard petroleum products from being dumped in Nigeria’s market.

“Beyond this, we intend to ensure that our plants are run at the highest capacity of utilisation and the highest efficiency to enable us to export competitively to other markets, especially in the ECOWAS and wider regions in which 53 countries out of 55 are dependent on imports to meet their petroleum products demand,” he added.

He said the project was the realisation of a “clear opportunity” for Nigeria, citing the African Union’s commitment to the creation of an African common market through the African Continental Free Trade Area (AfCFTA).

Nigeria could save up to $10 billion in foreign exchange and generate another $10 billion in exports with the commencement of the refinery, he said.

The refinery which was initially estimated to cost about $9 billion when it was conceived in 2013, was completed with a total of $19.5bn with funding distributed into 50 percent equity investment and 50 percent debt finance.

“What you may not be fully aware of is that the Dangote Group has started repaying some of the commercial loans even before the commissioning of this facility, Nigeria’s immediate past Governor of Central Bank, Mr Godwin Emefiele said.

“This reflects the commercial capability of the Group and its Chairman. I am pleased to inform everyone today that, following extensive repayments, outstanding debt has dropped appreciably from over $9 billion to less than $3 billion.”

The refinery has also witnessed an increase in staff strength by 17,000 bringing the total number to 57,000 in the first quarter of 2022, is designed to produce about 50 million litres of petrol daily; and yearly production of 10.4 million tonnes of gasoline, 4.6 million tonnes of diesel, and 4 million tons of jet fuel a year.

It will also produce 0.69 million tonnes of polypropylene, 0.24 million tonnes of propane, 32,000 tonnes of Sulphur, and 0.5 million tonnes of carbon black feed.

The refinery was initially estimated to cost about $9 billion when it was conceived in 2013, but has been completed with a total of $19.5bn with funding distributed into 50 percent equity investment and 50 percent debt finance.

Meanwhile, in the struggle for dealership in the products of the refinery, seven

Seven marketers – 11 Plc, Conoil Plc, Ardova Plc, MRS Oil Nigeria Plc, OVH Energy Marketing Limited, Total Nigeria Plc and NNPC Retail – have been approved to market products of Dangote Petroleum Refinery..

The oil marketers registered Dangote Petroleum Refinery for the lifting and distribution of refined petroleum products produced by the plant across the 36 states and the federal capital territory (FCT)..

Dealers under the aegis of the Major Oil Marketers Association of Nigeria confirmed on Jan. 14 that with the registration, they would commence the distribution of fuel produced from the facility once the commercial terms are sorted.

This came as the Independent Petroleum Marketers Association of Nigeria also revealed that they would meet with the management of the Dangote refinery this week to discuss terms of product loading.

The Petroleum Products Retail Outlets Owners Association of Nigeria stated it had been engaging the management of the refinery for the supply of products from the facility.

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