Nigeria: Assessing Nigeria's Quest to End Petrol Importation

12 November 2019

Nigeria's dream of becoming a net exporter of petroleum products is gradually coming through. 

With the 650, 000 per day capacity Dangote Refinery and Petrochemical Plant nearing completion, and the 445, 000 per day refinery of the Nigerian National Petroleum Corporation (NNPC) witnessing aggressive Turn Around Maintenance (TAN), coupled with the NNPC's proposed 200, 000 condensate refinery, Nigeria is right on track to becoming a net exporter of petroleum products.

Over the years, Nigeria has been a laughing stock in the comity of oil producing nations due to her inability to refine her crude to meet domestic consumption. Nigeria is the second largest producer of crude oil in Africa and ranks sixth globally. The country produces an average of 1.9 million barrels of crude oil per day and has about 37 billion barrels of oil in reserves.

Every year, this oil producing nation spends billions of dollars on subsidy for the importation of refined petroleum products from other countries, (even from countries without a drop of oil), mainly on petrol. Nigeria produces crude, exports it and then buys from refiners in other countries at an outrageous cost. The country has been in this mess for decades with no solution in sight.

The four national refineries in Warri, Port Harcourt and Kaduna have never delivered up to half of its installed capacity even after series of TAN on them, and with huge amount of money spent on those failed attempts. The situation has plunged the country into huge economic loss as funds that would have been used to develop other critical sectors of the nation's economy were used on petrol subsidy.

However, with the public and private sector collaboration and shared vision, particularly the NNPC and Dangote Group, the trajectory is beginning to change, and Nigeria will soon change from an importer of fuel to exporter in a few years to come.

Dangote's Move

Upon realising that private sector participation was necessary to drive economic growth and development of a country, Dangote Group decided to invest in the nation's refining space to help solve Nigeria's years of petrol import dependence.

The $12 billion refinery which is under construction at the Lekki Free Trade Zone, Lagos, is projected to complete its mechanical work by December 2020 and commence full operation six months after, the group's Executive Director, Strategy, Capital Projects and Portfolio Development, Mr. Devakumar Edwin, said at the 2019 Oil Trading and Logistics (OTL) Expo in Lagos.

Also during the tour of the facility led by the Minister of State for Petroleum Resources, Chief Timipre Sylva, last week, Edwin disclosed that the products from the refinery could be marketed anywhere in the world including Europe, South America, West Africa and Central Africa.

He said: "It is one of our targets to take diesel to Europe. Our equipment is already being designed to do this. We can take surplus petrol to South America, apart from West African countries and Central African countries. That is why we decided to go for Euro V.

"The refinery can handle all the Nigerian crude grades and all the African crude grades, as well as some of the Middle East grades and the US light oil."

He added that the refinery could meet 100 per cent of the Nigerian requirements of all the liquid products and will have surplus to export.

The Organisation of Petroleum Exporting Countries (OPEC) had sometime said the refinery was expected to reduce the need for fuel imports in West Africa.

A statement from Dangote Group had quoted OPEC as saying, "Last year's World Oil Outlook hinted that, in Africa, new projects could improve the situation somewhat toward the end of the period. This year, increasing confidence that the Dangote project in Nigeria will go ahead is indeed changing the picture.

"Allowing for some uncertainty in the project's start-up timetable, incremental potential in Africa is expected to continue to lag incremental demand-based requirements through 2020, after which the potential is for a balance or excess requirements.

"A deficit of around 0.2 million barrels per day in 2019 to 2020 is estimated to swing to an excess of around 0.3 million bpd by 2022 to 2023. It must be borne in mind that this regional outlook is unusual in that it hinges largely on a single project."

However, Edwin corroborated OPEC's view, pointing out that all hands were on deck to deliver the refinery on time.

He noted that Dangote Group's ongoing refining and petrochemicals project can meet 100 per cent of the domestic demand for petroleum products -petrol, diesel, kerosene and aviation fuel, leaving the surplus for export in line with OPEC's expectation.

He said that the high volume of petrol output from the Dangote refinery would transform Nigeria from a petrol import-dependent country to an exporter of refined petroleum products.

The President of Dangote Group, Alhaji Aliko Dangote, however, stated that upon completion of the refinery, 53 per cent of the refining capacity would be dedicated to the production of petrol. This means that 344,500 barrels of its projected 650,000 barrels per day refining capacity would be dedicated to the production of petrol.

He said the group ventured into the project because of its belief in Nigeria.

According to Dangote, "First of all, I think we believe in Nigeria and number two, if we don't do it by ourselves nobody will come down here and do it for us. We know that there is growth in the population, almost three per cent annually. So, Nigeria is actually supposed to be feeding the entire West and Central Africa and that is what we are trying to do, that is why we went for this massive capacity."

The Collaboration

Both the NNPC and Dangote Group are actively collaborating to ensure the vision of making the nation a net exporter of petroleum products is achieved. Although, both have their individual business interest to pursue, the issue of solving this national problem has bound them together as each is backing the other to succeed.

The NNPC which has maintained its stand that Nigeria must end its penchant for petrol importation is aligning with Dangote Group to see to the eventual completion of the refinery to complement its 445, 000 bpd capacity refinery and the upcoming 200,000 capacity condensate refinery. Rather than seeing each other as rivals, both the NNPC and Dangote Group see each other as partners in the quest for national progress.

The Group Managing Director of the NNPC, Mallam Mele Kyari, has repeatedly said the corporation was not in competition with Dangote, rather both were out to support each other for the good of the country.

Also speaking at the facility tour, Kyari said: "First of all, we are not competing with Dangote; we are complementing each other and our objective is the same, to make Nigeria a net exporter of petroleum products. And you can't do this until you have complementary activities by all stakeholders, the public and the private sector.

"And what we are doing with our refineries is to make them work so that by the time the Dangote Refinery comes up we have a full complement with the NNPC refineries that will make Nigeria a net exporter of gasoline and other associated products."

Probably in the next five years, if you combine the 650, 000 Dangote Refinery, the 445, 000 NNPC refineries and the addition 200,000 condensate refinery, we will have up to a million barrels refined products for the country.

Success Story

In his remarks, Sylva stated that the Dangote Refinery would be a success story coming out of Nigeria. He also pledged the support of the federal government to Dangote Group to ensure the completion of the facility.

Sylva said: "This is a very heartwarming moment for all of us as Nigerians. There is no way a project of this magnitude will be going on and government will not be interested. Anywhere in the world, if a citizen of a country has committed so much money into investing in this kind of massive project, government must show interest.

"I must say now that Dangote Group has turned this project to the story of all of us; we must all support this project to succeed, because the success of this project signals a lot. Of course, I am sure that the whole world is looking at the success of this project. Investors all over the world will look at the success of this project and will come to Nigeria to at least also enjoy the benefit of investing here.

"So, we are actually here to assure you, Dangote Group, that as a government, as NNPC, we will support this project as much as we can. You have definitely done very well. We will like to go from here to see the rest of the project. And then, please feel free to tell us where you think we can support.

"As you can see, the whole team is complete, and whatever your concerns are, whatever your problems are, please feel free to let us know, so that we will together find a solution to problems that you might encounter. Because of course, in project of this magnitude, you cannot expect that you will not have problems.

"We really are quite proud of you to have engaged in a project of this magnitude. If we as Nigerians don't invest in this country, who will come and invest in it? The fact that you are investing this massively in the country is a signal for others to come to this country. That's why we must support you to ensure that this project becomes a success, because if this project is a success, it is a success story that is coming out of Nigeria that will attract other people to also come here and invest.

"So, let us all as Nigerians come together, let us all as industry come together and ensure that this project is a success story out of Nigeria".

Also fielding questions from journalists after the facility tour, Sylva, described the refinery as one of the most impressive projects ever seen.

He added that the government will lend its support to Dangote Group in the area of feedstock, saying that will depend on what the group said is their need.

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