Page 4 - DMEA Week 31 2021

DMEA COMMENTARY DMEA

NNPC gets go ahead for Dangote

deal as losses laid bare

During a week in which the state oil firm announced its losses from idled refineries, it has
been given the green light to acquire a stake in what will be the continent’s largest refinery.

AFRICA THE Nigerian Cabinet this week gave its ago much earlier. It’s not what he wants, but they
approval for the country’s national oil company are also aware that they operate in a resource-de-
(NOC) to proceed with the acquisition of a stake pendent country. We made a request and it’s the
WHAT: in a refinery that promises to change the down- policy of government that we take interest in this
NNPC appears to be stream landscape across West Africa. refinery.”
strong-arming its way On August 4, Minister of State for Petroleum The stance of both parties is hardly surpris-
into the most exciting Resources Timipre Sylva said that Nigerian ing when we consider that by its own admission,
downstream project ever National Petroleum Corp. (NNPC) had received NNPC failed to carry out satisfactory turna-
announced in Nigeria. the green light to acquire a 20% in the Dangote round maintenance (TAM) on its four state-
Refinery project for a total of $2.76bn, valuing owned refineries at Port Harcourt (two), Kaduna
WHY: the total project at around $14bn. The refinery and Warri. However, the state firm has embarked
Dangote did not request will have a throughput capacity of 650,000 bar- on a multi-billion dollar project to rehabilitate
the investment and rels per day (bpd) when it comes on stream early these facilities under a strategy that will see it
reading between the lines next year. take a backseat role in the country’s refining sec-
suggests that the state The announcement follows the signing of tor, outsourcing the maintenance and day-to-
firm is leveraging its term sheets by NNPC and Dangote Group, with day running of operations.
position to ensure it goes talks understood to be ongoing regarding the Dangote has said previously that NNPC was
through without explicitly financing of the acquisition. one of four companies to make approaches to
saying so. acquire equity in the refinery in order to secure
Strong hand crude supply deals.
WHAT NEXT: For NNPC, the deal is an important part of its
NNPC has a woeful new strategy for the downstream sector, follow- Funding the deal
track record in refining ing decades of poor performance. However, the Abuja needed a $1bn loan arranged by Cai-
and this is illustrated company admits that Dangote Group’s Presi- ro-based Afreximbank to kick off its refinery
by its recent financial dent and CEO Aliko Dangote was not keen on overhaul project and there has been speculation
results which outline the NNPC’s involvement. that the lender may be involved in supporting
continued operating costs Speaking to This Day in mid-July, NNPC the acquisition of the stake in the Dangote unit.
at facilities that have not managing director Mele Kyari said of the invest- During negotiations for the first loan, the
processed crude since ment: “He didn’t ask for it. It’s our decision to bank insisted that NNPC hire a “professional
2019. take equity. We made this decision three years operations and maintenance company” to

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