Page 23 - AfrOil Annual Review 2021

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He added: “If you look at the cost of freight Emefiele added: “That is the element where
alone, it is a major saving for Nigeria. That is foreign exchange is saved for the country
because if we have to go to Europe or other parts becomes very clear. We are also very optimistic
of the world to bring in petroleum products that by refining this product here in Nigeria, all
where we pay heavily in freight and in stocking those costs associated with either demurrage
those products in the high sea before we offload from import, costs associated with freight will
them, Nigerians will benefit a lot from the Dan- be totally eliminated.”
gote Refinery.” Based on this approach, the governor antici-
Meanwhile, Dangote’s petrochemical facili- pates that refined products will become cheaper
ties are expected to save a further 5% of forex in the domestic market.
from polyethene (PE) and polypropylene (PP) Meanwhile, the strength of the currency also
granules and another 2% from fertilisers like could be boosted by naira-denominated export
urea. sales. Emefiele said: “If we are lucky that what the
According to Dangote’s executive director refinery produces is more than we need locally
of strategy, capital projects and portfolio devel- you will see Nigerian businessmen buying
opment, Devakumar Edwin, the $2bn facility’s small vessels to take them to our West African
slate will comprise 77 different grades of PP, neighbours to sell to them in naira … This will Emefiele has
with the unit becoming the largest of its kind in increase our volume in naira and help to push it
Africa. Mechanical completion of the refinery is into the Economic Community of West African suggested that
anticipated late this year, with operations pegged States as a currency.”
to begin in January 2022 ahead of full start-up In early August, Minister Sylva said that Nigeria’s savings
later in the year. NNPC, which has since been replaced by a new
The unit will have a capacity of 900,000 state-owned firm known as NNPC Ltd, had could be as
tonnes per year (tpy) and is expected to gener- received the green light to acquire a 20% in the high as 41%
ate an annual turnover of $1.2bn. Emefiele noted refinery project for a total of $2.76bn. This puts
that Nigeria’s annual consumption of PE and PP the value of the total project at around $14bn. if petroleum
is just 200,000 tpy, leaving 700,000 tpy available Speaking ahead of the investment’s sign-off,
for export. NNPC’s Group Managing Director Mele Kyari products were
said: “[Dangote] didn’t ask for it. It’s our decision
Refinery backing to take equity. We made this decision three years sourced locally
The refinery is expected to come in at a final cost ago much earlier. It’s not what he wants, but they and purchased
of $17.5bn, with Dangote retaining an equity are also aware that they operate in a resource-de-
share of around $9bn. Emefiele said that the pendent country. We made a request and it’s the in naira
remainder has been contributed by a combina- policy of government that we take interest in this
tion of foreign banks, local banks and the CBN. refinery.”
“That project is one of Nigeria’s backward With Nigeria’s entire 445,000 bpd state-
integration programmes, and we are very proud owned refining capacity having been offline
it is coming to light. And indeed we know that since 2019 and NNPC having failed to carry out
refineries abroad are already scared because they full turnaround maintenance (TAM) on any if
know the market they will lose because Nigeri- its facilities, there has been widespread concern
ans will prefer to patronise that than foreign about the company taking a role in the Dan-
imported refined products where we will save gote unit. However, as the government seeks to
[on] transportation and logistics,” he said. shake up the national oil and gas industry, the
The governor’s comments in March sug- state has a mandatory option to acquire a share
gested that the savings could be as high as 41% in any private refinery with a capacity of 50,000
if petroleum products were sourced locally and bpd or more. Such investments will allow NNPC
purchased in naira. Ltd to take greater control over Nigeria’s mid-
“Based on agreement and discussions with and downstream, guaranteeing crude offtake
[Nigerian National Petroleum Corp., or NNPC] and reducing its exposure to market volatility,
and the oil companies, the Dangote refinery can thereby potentially making it a more attractive
buy its crude in naira, refine it and produce it for investment proposition ahead of a potential ini-
Nigerians’ use in naira,” he said. tial public offering (IPO). ™

Dangote refinery construction site (File Photo)

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