Page 4 - DMEA Week 34 2021

DMEA COMMENTARY DMEA

More moves in Nigerian refining

Updates have been provided at both extremes of Nigerian
efforts to reinvigorate the country’s dilapidated refining sector

AFRICA OFFICIALS this week provided updates on the session on the Medium Term Expenditure
Nigerian National Petroleum Corp.’s (NNPC) Framework (MTEF), NNPC managing director
acquisition of a stake in the country’s largest Mele Kyari said that the decision to acquire the
WHAT: refinery and the progress of efforts to build upon stake was taken to ensure that the refinery buys
NNPC has provided more the success of the first modular unit in Imo State. Nigerian crude.
information about the At present, while licences have been issued to Kyari said that Dangote “has the right to buy
rationale behind its move add more than 1mn barrels per day of capacity, oil from anywhere. So you can’t force him to buy.
to acquire a 20% stake in NNPC’s full 445,000 bpd slate is offline for major We structured our equity participation that this
the Dangote Refinery. rehabilitation work, leaving the aforementioned refinery must buy at least 300,000 [bpd of] crude
5,000 bpd modular unit developed by Walter- from us. This guarantees [our] market”.
WHY: smith Refining & Petrochemical Co. at Ibigwe He added: “Today, every country is struggling
Dangote did not want as Nigeria’s only functioning refinery. to secure market for their crude oil. This refin-
the Nigerian state’s Work is nearing completion on the 650,000 ery does not owe us any responsibility if we don’t
involvement, but NNPC bpd Dangote Refinery at Lekki near Lagos, how- have this arrangement. That is why we tied our
has moved to ensure that ever, which will transform the Nigerian down- participation to the fact that this refinery must
the facility buys locally stream sector overnight when it comes into buy from us.”
produced crude. operation early next year. With the refinery having a high Nelson com-
The announcements come as NNPC also plexity, it would be able to process a wide variety
WHAT NEXT: launched a subsidiary to oversee the develop- of crudes, and Kyari said that the NNPC felt it
Independent firms ment of greenfield refineries (see NNPC sets up needed to act to protect state interests.
working to build out greenfield oversight subsidiary, page 10). He added that the decision was an informed
modular refining capacity and pragmatic one, confirming the involvement
are closing in on the Dangote deal of Cairo-based lender Afreximbank, which has
launch of several new Early this month, the Nigerian Cabinet gave its already provided NNPC with $1bn to carry out
facilities which will be approval for NNPC to proceed with the acquisi- the rehabilitation of the 210,000 bpd Port Har-
integrated with upstream tion of a 20% stake in the Dangote unit for a total court refining complex.
projects to provide fuels of $2.76bn, below valuation for the $19bn unit. “We simply saw this opportunity, we said are
and products to remote As with most announcements relating to state not going to take any government money to put
communities. investment in refining, the news was met with a into this. We are borrowing money from the
mixture of scepticism and criticism. Afrexim consortium to pay for our initial pay-
Meanwhile, rather than Dangote having ment and also tied [Dangote’s] subsequent pay-
approached the state for its participation, the ment to [it] buying from our production.”
firm’s owner Aliko Dangote is understood to be It “was a very calculated and conscious deci-
unimpressed by the move. sion”, he added. “First, there is no resource-de-
Addressing the House of Representatives pendent country like ours anywhere, and with a
Committee on Finance this week during a national oil company will have a venture of this

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