Inauguration Of The “Dangote Petroleum Refinery & Petrochemicals”, Alhaji Aliko Takes Up Africa’s Energy Challenge.
Outlook media Abuja.
By Eng. Mahaman Lawan Gaya,
Petrochemical Engineer.
Former Minister of Republic of Niger,
Former Secretary General of African Petroleum Producers’ Organization (APPO)
I – Discovering the ”Dangote Petroleum Refinery & Petrochemicals”
The ”Dangote Petroleum Refinery & Petrochemicals” – DPRP (inaugurated on
Monday, May 22, 2023) is located on a plot of 2635 hectares in the free zone of
Ibeju-Lekki, in the State of Lagos in Nigeria (80 km east of the city of Lagos, the
site is seven (7) times the size of Victoria Island : the business district of Lagos
City).
In 2005, Alhaji Aliko Dangote thought of building a 300,000 barrels/day
(bpd) refinery, but at that time, he did not have the financial capacity to carry
out this project.
Then, in 2010, with the improvement of his cash flow, he
claimed to have repaid all the debts of the Group which amounted to 2 billion
US dollars, and better started to accumulate liquidities. So, he said, “we
reviewed our plans and raised its production capacity first to 400,000, and
finally opted for the current schedule of 650,000 bpd”. It was originally planned
to be built in Ondo State, but due to lack of political will from the then
government of that State, Aliko Dangote moved the project to the current site.
I would remind you that the construction work for this refinery has not yet
been completed ; President Muhammadu Buhari, due to leave power on May
29th, 2023, himself wished to inaugurate this mega-project with great fanfare,
“so that it is to his credit”, as reported by Taiwo Oyedele, analyst at PwC in
Lagos. According to the report of the ”Nigerian Midstream and Downstream
Petroleum Regulation Authority (NMDPRA)”, the Dangote refinery must first
pass the mandatory Technical Acceptance Test (TAT) before to start its
activities. Since this procedure technically takes a long time, the operation of
this refinery could only fully begin in 2024 (they estimate that it takes at least a
year for the plant equipment to be sufficiently run in) ; but Aliko Dangote
assured in his inaugural speech that the products of the new refinery would be
on the market “by the end of July – beginning of August 2023”. While Dangote
Group’s oil technicians are working to complete the work on time, teams from
the International Monetary Fund (what are they getting involved in?) are
instead considering “a gradual production trajectory : from 100,000 bpd in
2024, 200,000 bpd in 2025, rising to 300,000 bpd in 2026-2027”… far from the
650,000 bpd mentioned at will throughout the inauguration ceremony.
II – Refinery Capacity
Once fully operational, which will make it the largest in Africa, the 6th largest in
the world, as well as the largest “single train” oil refinery in the world (this
means that the plant has a single integrated crude oil distillation system that
can produce a variety of secondary petroleum products and petrochemical
synthesis products, instead of having different units for each type of product).
Also, it is one of the few companies in the world to directly have a crude oil
refining plant coupled with a petrochemical complex under an EPC contract
(Engineering, Procurement & Construction). In 2019, during its construction,
the largest crude oil distillation column in the world, weighing 2350 tons, was
installed there by a specialized Dutch company. With a height of 112 meters, it
is slightly taller than the Saturn V rocket that brought the first man to the moon
(110.6 m) and 16 meters taller than Big Ben. It was also installed the same year,
the heaviest refinery regenerator, which is also the heaviest single piece of
steel structure (3000 tons) in the world. This regenerator, part of the catalytic
cracking unit, is intended for the cracking of heavy oil fractions and their
transformation into lighter molecular components such as gasoline, kerosene,
jet, etc. A Penex-type refined product stabilization column measuring 50
meters high, 8 meters in diameter and weighing 520 tons was also installed
there. Worldwide, with the exception of three (3) companies, no individual
owner has completed a full EPC contract for an oil refinery. Dangote Refinery
will have a “Nelson Complexity Index” of 10.5. Note that the “Nelson
complexity index”, which varies from 1 to 20, is a frame of reference used to
assign values to oil refineries according to their level of complexity. The higher
the index, the more versatile and flexible the refinery and has more
sophisticated equipment. The ‘’DPRP ‘’ will then be more complex than many
refineries in the United States (average of 9.5) or in Europe (average of 6.5) ;
the largest refinery in the world, that of Jamnagar in India, totals 14 points.
Note that the Dangote refinery is 32.5 times larger than the SORAZ (Oil refinery) of Republic of Niger (which I recall has a capacity of 20,000 bpd) and more than three (3) times the oil production of Ghana. In 2013, during the start-up phase of the project, the cost of the refinery was estimated at 9 billion US dollars (re-evaluated several times) and the work did not really begin until 2016. Today, the total investment cost is estimated at nearly 20 billion US dollars. It should be noted that 50% of these investments were made with Dangote Group’s own funds and the other 50% with bank loans ; 70% of bank loans have been repaid to date. The plant will produce daily (no despite the Bretton-Woods Institutions), 53 million liters of gasoline, 34 million liters of diesel, 2 million liters of Jet A1-aviation, bitumen and petrochemical synthesis products (all complying with Euro V specifications). It has, in annex, a petrochemical plant for the production of polypropylene (900,000 tons) and a fertilizer manufacturing plant. This fertilizer manufacturing unit will have two (2) production lines, each producing 2,200 tons of ammonia and 4,000 tons of granulated urea daily. The ’DPRP ‘’ is calibrated to process 100% nigerian crude oil quality and is also designed to process a wide variety of crude oils from Africa, the Middle East and light oil (West Texas Intermediate – WTI) from the United States of America). For its operation, it will have a 435 MW power plant ; this plant alone will be able to meet the total energy needs of Ibadan DisCo of 860,316 MWh covering five (5) states, including Oyo, Ogun, Osun, Kwara and Ekiti. Let us recall (to get an idea) that the total installed electrical power of the entire Republic of Niger in 2021 is 412.55 MW and that of Côte d’Ivoire is 2200.00 MW. As oil refineries require a lot of water (to supply the cooling systems, the fire-fighting system, etc…), 177 tanks with a capacity of 4.742 billion liters have been planned. It will be supplied with crude oil by the largest submarine pipeline infrastructure in the world (1100 km long). III – One of the most complex logistics In terms of logistics, many will perhaps never know what Aliko Dangote had to endure to bring this project to fruition. Indeed, its implementation has faced serious and daunting challenges. Its construction required equipment that weighed about 3,000 tons, while the capacity of Nigeria’s ports (including Lagos-Apapa) is between 200 and 250 tons. To do this, it was necessary to build a new port to bring oversized cargo directly to the site, but also to facilitate the supply of crude oil and the export of products from the refinery. Two (2) quays were also built with a capacity to accommodate Panamax-type vessels (80,000 tons) for the export of fertilizers and petrochemical products and two (2) other quays for the handling of liquid cargoes. The port will have a total of six (6) quays, including one (1) Roll-on/Roll-off quay (Roll on/Roll off, abbreviated as Ro/Ro, is an english expression used in logistics and which can be understood as “Roll to enter/Roll to exit”). It designates Ro/Ro traffic, i.e. the transport of heavy goods vehicles or trailers by special boats called ” Ro/Ro”). For the land transport of materials and equipment from the port to the refinery site, special road construction works were required. Note that the largest crane in Nigeria has a power of 650 tons, while a 5000 tons crane was needed for the lifting of certain equipment. Worse still, there were then only two (2) cranes of this type with a capacity of 5000 tons in the world, all of which were in service ; so, instead of renting one for 300,000 US dollars a day, Aliko Dangote preferred to buy one altogether. Added to this is the purchase of 332 cranes to strengthen the installation power of the equipment. Inside the factory itself, about 126 km of asphalt roads and 54,000 storm columns have been built for protection. As for human resources, Alhaji Aliko Dangote trained nine hundred (900) young engineers in petroleum refining technology outside the country, six (6) mechanical engineers trained at GE University in Italy, fifty (50) process engineers trained by Honeywell/UOP and fifty (50) management executives. When fully operational, it will provide 135,000 permanent jobs. On site, there are more than 200 buildings built that can accommodate approximately 50,000 employees and their families in order to put them in the necessary working conditions ; rare thing in the mining and energy industries over the world. IV – Nigeria’s energy challenges linked to the commissioning of the ‘’DPRP‘’ When the refinery is fully operational, it is expected that Nigeria will no longer import any petroleum products and also (political decision) to allow the nigerian government to lift once and for all its huge (and unnecessary) import subsidies from ‘’Premium Motor Spirit‘’ (PMS). Over the years, these subsidies have given rise to and maintained an important lobby of gasoline import traders-speculators who have deliberately worked to bring about the bankruptcy of the four (4) public refineries managed by the NNPC (1 in Kaduna, 2 in Port Harcourt, and 1 in Wari). During the inauguration ceremony of the ‘’DPRP‘’, the Managing General of the ”Nigeria National Petroleum Corporation” (NNPC), Mr Mele Kyari said that ‘’it is very, very difficult for the State to continue to pay 400 billion nairas’’ (some 950 millions US dollars), of subsidy each month (4800 billion nairas per year). All the major candidates in the last presidential elections had, during the campaign, promised that once elected, they would suspend subsidies for gasoline imports. As expected, in his inaugural speech on Monday, May 29th, 2023, the new President Ahmed Tinubu announced the total removal of the fuel subsidy, which it must be remembered is a system that feeds corruption and dries up public funds (a double-edged knife). As of May 30th, 2023, the decision was officially confirmed and it will take effect on July 1st, 2023. Fuel should then drop from the official price at the pump of 185 naira (0,40 US dollar) to 550 naira (1,18 US dollar), more expensive than in Niger where it is 540 FCFA (1,00 US dollar). But as soon as this measure was announced, prices immediately soared to the point of reaching the ceiling of 700 naira (1,50 US dollar) per liter in Abuja. If this trend continues, it is highly feared that gasoline on sale in neighboring countries will fraudulently end up on black markets in Nigeria and the opportunity has been found by certain governments to justify an entirely artificial increase in the price of a liter of gasoline in their country. The neighboring oil-producing countries (Niger, Chad, Cameroon), with the “meager” production of their refineries, could find themselves in a situation of “dry breakdown”. For how long ? ? However, there is no doubt that the fuel subsidy has a very negative impact on the finances of the Nigerian state and that it would have been fiscally irresponsible to keep it indefinitely. This subsidy lifting is already creating immense dissatisfaction among consumers, even if it will also make it possible to definitively stop corruption and speculation on petroleum products and federal finances to earn over eleven (11) billion US dollars annually. At full capacity of its 650,000 b/d, the ”DPRP” would more than cover Nigeria’s total demand for refined products (450,000 b/d), and as there is also talk of rehabilitating the four (4) national refineries suffering (cumulative capacity of 445,000 b/d), in addition to the other private modular refineries (with very small capacities) in the country (the Walter Smith refinery, the OPAC refinery, the Niger Delta Petroleum refinery and the Edo Petroleum refinery), the total production of the country in refined products will more than double national consumption. With such a situation of “overproduction”, analysts think, there is even already talk in some circles, of a possible readjustment to the fall in prices at the pump; in any case, the government has every interest in doing so to bring Nigerians back to the pumps and thus reduce the production of all the country’s refineries. Aliko Dangote is thinking of making products from his refinery, which he is doing today with products from his cement works: “flooding” neighboring countries; and this would only be possible with very competitive refined product prices. Indeed, on Monday May 22, 2023 at the podium of the inauguration ceremony of the refinery, Aliko Dangote promised to ”reproduce what [the Dangote group] has already achieved in the cement and fertilizer market, by making move Nigeria from importer to net exporter. For Africa’s richest man, it’s a matter of determination and stubbornness, imbued with a courage that is now paying off. Assuming lower prices at the pump; internally it would significantly reduce fraud and above all would compromise the thousands of clandestine artisanal refineries that scour the oilproducing regions of the Niger Delta and in the sub-region (the implementation of the ZLECAf helping), the refineries of neighboring countries ( SORAZ in Niger, SNR of Djermaya in Chad, SONARA in Cameroon, SIR in Ivory Coast) could be confronted with serious problems of slump (for the moment, we are not there yet !). The national oil company NNPC will be a 20% shareholder of the “Dangote Petroleum Refinery & Petrochemicals” and will supply it with 300,000 barrels of crude oil per day. This issue has also been raised by nigerian oil industry experts and the Crude Oil Refineries Owner’s Association of Nigeria (CORAN) who, while welcoming this decision of NNPC, expressed concern that the national company appears to have discriminated against other refineries in the country. Indeed, the latter are facing enormous difficulties in the supply of crude oil from the NNPC, which is severely testing their resilience and hampering their ability to develop. The Federal State must correct this error, by taking appropriate measures to eradicate crude oil thefts, which have been estimated for the year 2022 at approximately 450,000 bpd ; which corresponds to the productions of Congo and Gabon combined. The commissioning of the Dangote refinery will rebalance Nigeria’s energy balance, will considerably increase the added value (tax revenue, direct income, etc.) of the State, with most certainly the recovery of the enormous losses suffered by the Federal state close to 450,000 barrels of crude oil V – Alhaji Aliko Dangote takes up the challenge of energy independence and energy poverty in Africa Today, it is clear that in Africa, there are global issues that require a global response, a synergy of action, a pooling of efforts for more efficiency in the governance of our natural energy resources (essential for the energy independence of our countries and for the fight against energy insecurity and poverty in which our populations live) and to do this it is absolutely necessary the participation of all (governments, international partners, african private sector, etc…) Indeed, it is deplorable to note that african countries are still very dependent on the export of their energy resources, both in terms of foreign currency and revenue. Africa holds at least 13% of the world’s oil reserves, mainly concentrated in North Africa and West Africa. African consumption of petroleum products is relatively low ; it stands at 4 million bpd, i.e. 4.1% of world consumption. With the commissioning of the Dangote refinery, this rate will improve considerably (by adding the 650,000 bpd from the ‘’DPRP‘’ and also taking into account the gain resulting from the probable recovery of the 450,000 barrels lost daily by the NNPC from made various thefts of its crude oil). Also, the commissioning of the Dangote refinery will of course make it possible to reduce (and save) the expenses incurred for the import of petroleum products by certain African States (direct beneficiaries of the spinoffs from the Dangote refinery). I remind that the federal government of Nigeria will thus save 9.6 billion euros annually (more than 13 billion naira per day) in added value due to the installation on national soil of an oil refinery of such capacity. For its part, the Central Bank of Nigeria (CBN) estimates the direct annual contribution of the ‘’DPRP‘’ to the national economy at nearly 10 billion US dollars. On the continent, oil is the second most consumed energy resource after biomass, with a share of 28% in the energy balance, and most of the oil products consumed in Africa come from refineries in Europe (non-oil producing countries) and the Middle East. Paradoxically, the continent’s refining infrastructures (some 50 oil refineries, are essentially obsolete and some shut down) have very limited capacities and operate at high costs given that they are relatively old (35 years old on average). Despite its enormous energy deposits (fossil fuels and renewable energies), and with a population of about one billion inhabitants, Africa’s per capita primary energy consumption remains the lowest in the world with 0.63 toe (ton oil equivalent) against 1.76 toe at world level (4.31 toe for Western Europe, 8.46 toe for North America). If we exclude North Africa and South Africa, this rate of primary energy consumption falls between 0.2 and 0.4 toe for the rest of Africa, i.e. SubSaharan Africa. The annual oil consumption of the average african citizen is equivalent to one-third (1/3) of the world’s average individual consumption and one-twentieth (1/20th) of the consumption of an average american. Worse, the energy balance of some african countries shows a biomass consumption rate (agricultural and forestry waste and wood) of more than 60% ; the rest being made up of so-called modern energies (petroleum products and electricity). Will Africa continue to be a supplier of energy resources to other countries of the world and its citizens continue to live in the most disastrous of energy precariousness and poverty? What are States and regional and subregional institutions doing on energy sector governance? This is precisely the place to mention and salute here, the eminently important contribution of a worthy son, Alhaji Aliko Dangote who decided to take up the challenge in the search for energy independence for the continent and beyond the fight against energy poverty and precariousness of african populations (with modern, clean energy at an affordable price that will contribute to improving the income and well-being of populations). The Dangote refinery will make available to consumers of all social categories, energy petroleum products for transport, housing, services, fertilizers for agriculture, etc… Indeed, access to an energy supply quality, at lower cost and in better quantity, makes it possible to substantially improve the living conditions of populations because it promotes the improvement of agricultural productivity, the improvement of education, health services, access to water, income-generating commercial activities, communication, etc…. Nowadays, nothing works without modern and financially affordable energy ….. and it is this challenge that Alhaji Aliko Dangote is struggling to meet to the great benefit of africans. Today, Alhaji Aliko Dangote, who brings honor to Africa, is celebrated around the world as the Man (and not a company or a State) who built the largest oil refinery (to “single train”) of the world and which is based in Africa, precisely in the Federal Republic of Nigeria.