Page 5 - DMEA Week 36 2021

DMEA COMMENTARY DMEA

acquisition. The facility will be commissioned it grows its global refining footprint.
next year.
President and CEO Aliko Dangote also said Kaduna efforts
this week that the workforce at the refinery will Meanwhile, with NNPC having already agreed
be increased from the current 40,000 personnel to invest $586.9mn on the rehabilitation of
to 57,000 in the next few months as the project the refinery at Kaduna, the company last week
nears completion. entered into a memorandum of understanding
He said that the company is “creating a lot of (MoU) with the local government on increasing
capacity in the country, which will be of great natural gas deliveries and consumption in the
help for future oil projects in Nigeria, most espe- state. According to local press reports, the two
cially with the opening up of the oil industry sides signed the MoU at a ceremony earlier this
through the new Petroleum Industry Act.” week. Kyari said at the event that he hoped the
Meanwhile, NNPC has a terrible track record document would help make more gas available
in refining, and the acquisition of a minor- to industrial consumers in Kaduna.
ity stake in the Dangote unit accords with its “We all know that Kaduna used to be a hub
new strategy of taking a participation in the when it comes to industries,” he commented. “It
downstream sector while stepping back from is our hope that this MoU signing will help pro-
operatorship. vide the gas needed for some of those industries
The poor refining performance left a hole in to come back to life.”
the company’s finances, with losses fluctuating Kyari did not name any potential buyers in
between NGN5bn and NGN10bn per month to Kaduna, but he did state that NNPC planned to
give a total refining loss of $253mn as it contin- work with the state administration in Kaduna
ued to pay operating expenses for the inactive to promote and expand gas demand. The state-
facilities. owned company “is leading this co-ordinated
Its full 445,000 bpd refining capacity across effort with state governments and private sec-
facilities in Port Harcourt, Kaduna and Warri tor investors to develop demand framework for
has been offline since 2019 and the company is in immediate and long-term gas supply solutions
the process of overhauling these units, again with ahead of the completion of the Ajaokuta-Kadu-
the help of Afreximbank. The loan on this occa- na-Kano (AKK) and Obiafu-Obrikom-Oben
sion was agreed to on the condition that NNPC (OB3) gas pipelines,” he said.
bring in external help to run the units. He went on to say that NNPC’s co-opera-
The firm has also announced that it will tion with Kaduna State would help support the
acquire a mandatory stake in any privately Nigerian federal government’s “Decade of Gas”
owned refinery with a capacity of 50,000 bpd or programme. The parties have not yet divulged all
more. Such investments will allow NNPC to take the details of the MoU, but Garba Muhammad,
greater control over Nigeria’s mid- and down- a spokesman for NNPC, said on August 31 that
stream, guaranteeing crude offtake and reducing the MoU called for the state-owned company
its exposure to market volatility, thereby poten- and the Kaduna state administration to continue
tially making it a more attractive investment to work together on strategic gas utilisation initi-
proposition. atives. These include the AKK and OB3 gas pipe-
Comparisons with Saudi Aramco have been line projects, he said.
drawn in some circles, but doing so is signifi- Muhammad also indicated that the MoU
cantly flawed on account of the role the Middle would provide key players in Nigeria’s domes-
Eastern behemoth plays in the global energy tic gas market with a foundation for long-term
system. involvement in gas deliveries to Kaduna. The
However, as NNPC seeks to rationalise its state wants to obtain gas via the AKK and OB3
portfolio, acquiring a stake in one of its rehabil- pipelines on competitive terms and will apply to
itated refineries or indeed in the company via multiple suppliers, including Nigerian Gas Co.
the IPO could fit within Aramco’s strategy of (NGC), Nigerian Gas Marketing Co. (NGMC)
expanding its share in dedicated crude outlets as and virtual pipeline companies, he said.™

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