Page 5 - AfrOil Week 36 2021

AfrOil COMMENTARY AfrOil

Speaking to Arise News, Devakumar Edwin said operatorship.
that by the time it is completed, Dangote’s capital The poor refining performance left a hole in
expenditure on the 650,000 barrel per day (bpd) the company’s finances, with losses fluctuating
refinery will reach nearly $19bn. When first between NGN5bn ($12.157mn) and NGN10bn
proposed, the facility was expected to come in ($24.313mn) per month to give a total refining
at around $9bn, but that cost had risen to $15bn loss of $253mn as it continued to pay operating
by 2019. expenses for the inactive facilities.
NNPC has an agreement in place to acquire Its full 445,000 bpd refining capacity across
a 20% stake in the unit for $2.7bn, valuing the facilities in Port Harcourt, Kaduna and Warri
facility at around $13.5bn. Even then, NNPC has been offline since 2019 and the company is Poor refining
will pay only around $900mn in cash for the in the process of overhauling these units, again
shareholding, with the same value being pro- with the help of Afreximbank. The loan on this performance
vided via crude feedstock discounted by around occasion was agreed to on the condition that
$2 per barrel and another third will be paid in NNPC bring in external help to run the units. has left a hole in
profits from the business. NNPC expects to The firm has also announced that it will
receive $1bn in finance from the Cairo-based acquire a mandatory stake in any privately NNPC’s finances
African Export-Import Bank (Afreximbank) to owned refinery with a capacity of 50,000 bpd
fund the acquisition. The facility will be com- or more. Such investments will allow NNPC
missioned next year. to take greater control over Nigeria’s mid- and
President and CEO Aliko Dangote also said downstream, guaranteeing crude off-take
this week that the workforce at the refinery will and reducing its exposure to market volatility,
be increased from the current 40,000 personnel thereby potentially making it a more attractive
to 57,000 in the next few months as the project investment proposition.
nears completion. He said that the company is Comparisons with Saudi Aramco have been
“creating a lot of capacity in the country, which drawn in some circles, but doing so is signifi-
will be of great help for future oil projects in cantly flawed on account of the role the Middle
Nigeria, most especially with the opening up Eastern behemoth plays in the global energy
of the oil industry through the new Petroleum system.
Industry Act.” However, as NNPC seeks to rationalise its
Meanwhile, NNPC has a terrible track record portfolio, acquiring a stake in one of its rehabil-
in refining, and the acquisition of a minor- itated refineries or indeed in the company via
ity stake in the Dangote unit accords with its the IPO could fit within Aramco’s strategy of
new strategy of taking a participation in the expanding its share in dedicated crude outlets
downstream sector while stepping back from as it grows its global refining footprint. ™

ESG challenges for another

East African oil pipeline

Turkana County administration continues to fight Nairobi over land acquisition for LLCOP project

ESG (environmental, social and governance) and indigenous communities – as developments
issues are already having a disruptive impact surrounding the oil pipeline component of the
WHAT: on East Africa’s midstream sector. As NewsBase Lamu Port-South Sudan Ethiopia Transport
Nairobi is at odds with has reported previously, several commercial Corridor (LAPSSET) initiative demonstrate.
Turkana County over land banks and export credit agencies have decided These efforts have been spearheaded by the
acquisition for LLCOP . against supporting the East Africa Crude Oil government of Turkana County, which is lob-
Pipeline (EACOP) since a group of more than bying against the government’s approach to
WHY: 200 non-governmental organisations (NGOs) land acquisition for the Lokichar-Lamu Crude
The project is key to launched a public campaign designed to draw Oil Pipeline (LLCOP) project. County author-
unlocking oil production. attention to the project’s impact on local ecosys- ities have already failed in their bid to make the
tems and greenhouse gas (GHG) emissions. court system, rather than county and national
WHAT NEXT: But ESG issues aren’t just gaining prom- governments, responsible for the land acquisi-
If the dispute gains more inence because of campaigning by NGOs. tion process. Nevertheless, they are still work-
global attention, the They’re also arising on the local level, as a conse- ing to block the pipeline, on the grounds that it
project could stall. quence of efforts to protect the interests of local threatens local interests.

Week 36 08•September•2021 www. NEWSBASE .com P5