Page 4 - DMEA Week 21 2021

DMEA COMMENTARY DMEA

NNPC wants in on

Dangote, launches tender

NNPC is in talks to buy a 20% stake in the Dangote Refinery while also launching
a tender for a contract to rehabilitate and operate its own dilapidated facilities.

AFRICA THE Nigerian National Petroleum Corp. to run state-owned refineries was stipulated in
(NNPC) this week expressed its interest in the contract the Nigerian government signed
acquiring a minority equity stake in the 650,000 with Cairo-based African Export-Import Bank
WHAT: barrel per day (bpd) refinery under construction (Afreximbank) for a $1bn loan to rehabilitate the
The 650,000 bpd Dangote by Dangote Group in the Lekki free trade zone Port Harcourt refining complex.
Refinery will become (FTZ) near Lagos. In February, Minister of State for Petroleum
Africa’s largest when it Speaking at the Nigeria Oil and Gas Oppor- Resources Timipre Sylva noted that once the
comes into operation tunity Fair, NNPC’s chief operating officer for rehabilitation has been completed, a “profes-
next year. refining and petrochemicals, Mustapha Yakubu, sional operations and maintenance company
said: “We have what we call the greenfield refin- [will be hired] to maintain the refinery … this
WHY: ery and the Greenfield Refining Projects Divi- is one of the conditions of the lenders”. He
NNPC has a poor track sion (GRPD) of the NNPC. What we do, our added: “That’s embedded in discussions with
record when it comes strategy is to collaborate and seek strategic part- the lenders.”
to refining and its COO nerships with private investors.” Yakubu said that NNPC would no longer
this week admitted the “At the moment” he added, “we have Dangote operate the four state-owned refineries. He
company has adopted Refinery, which is the 650,000 bpd plus a mini noted that NNPC was ill-equipped to run the
a new model for its four 80,000 tonnes per annum (tpy) petrochemical refineries, opting instead for an operation and
refineries. plant.” maintenance (O&M) contracting model for the
“What are we doing there? I can tell you today units.
WHAT NEXT: that we are seeking to have a 20% minority stake Speaking to Downstream MEA (DMEA),
With funding in place in Dangote Refinery as part of our collabora- Ian Simm, Principal Advisor at consultancy
and NNPC taking a tion and you know that there’s a huge quantity IGM Energy, said: “Afreximbank’s insistence on
new approach, there is of crude for that refinery – that’s 650,000 bar- NNPC bringing in outside help appears to be the
newfound optimism about rels, going into a single crude distillation unit straw that broke the camel’s back. With funding
Nigeria’s refining outlook. (CDU),” he explained. in place and NNPC now seemingly on board
Yakubu said that discussions are ongoing with a new mindset, there is growing optimism
with Dangote about a potential deal. that Nigeria can realise a higher proportion of its
It should be noted that Dangote has provided ambitious refining plans.”
assurances that the refinery’s purchase of Nige- According to the Department of Petroleum
rian crude would not have an impact on the Resources (DPR), valid refinery construction
country’s 1.6mn bpd mandatory export volume permits cover plans for 1.09mn bpd of new
allocated by OPEC. capacity, with Dangote accounting for around
60%.
Chasing success
NNPC’s interest in such a move is hardly sur- Rehabilitation
prising given the strategic nature of the $15bn Amid such ambition, NNPC this week launched
Dangote unit, which will become Africa’s larg- a tender for a contract for O&M services at the
est refinery when it comes on stream early next idled refineries.
year. The state oil firm has spoken previously of The facilities at Port Harcourt (two), Kaduna
the need to engage the private sector in Nigeria’s and Warri have not processed crude since Jan-
refining industry, with the company having a uary 2019, following years of chronic under-
woeful refining track record. investment, with Yakubu noting that a more
The case is made even stronger when consid- comprehensive overhaul was required than reg-
ering that NNPC failed to carry out turnaround ular TAM.
maintenance (TAM) work at its three refin- He said that the units had been shut down
ing complexes for around 44 years, and its full to save money: “We believe the only way to do
445,000 bpd capacity has been offline since for that is to power them down to reduce some of
16 months pending overhaul. the cost. We have heard that we are spending so
With that in mind, bringing in external help much money on the refineries, yet they are idle.”

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