The Dangote Refinery Is Still Under Construction But Africa’s Richest Man Is Already Tying Up Major Oil Deals

It is no longer news that Africa’s richest man has forked out USD 12 Bn in pursuit of a gargantuan goal. Aliko Dangote is building the world’s biggest single-train oil facility on a swampland sitting on the outskirts of Lagos, Nigeria, and he’s covering significant ground en route to achieving that goal.

Last week, a massive atmospheric tower — the largest ever built — set sail from China and it is expected to reach Nigerian ports in the coming weeks. That was yet another milestone in the ongoing project and today’s news has it that Dangote is making another play. And it’s quite a strategic move too.

This time, Dangote may not be shipping mammoth-sized equipment from foreign lands but the latest effort is sure to have just as much impact. The news is that the Nigerian National Petroleum Corporation (NNPC) — the state-run oil company — will partner with the Dangote refinery that is still under construction in Lagos, in a move aimed at transforming Africa’s largest economy into a fuel supplier for the continent. This was revealed by Mele Kolo Kyari, the new Managing Director of the NNPC.

The Dangote refinery which is being built by billionaire Aliko Dangote, is set to be Africa’s largest; and Kyari told Reuters in an interview that the partnership between both institutions would be of mutual benefit to both entrepreneurship and national interest.

“Ultimately, it will be a contract to supply crude,” Kyari said. The NNPC boss added that the state oil firm intends to be a “supplier of first resort” for the Dangote refinery. Upon completion, the Dangote refinery would have a capacity of 650,000 barrels per day (bpd), provided it runs at full capacity.

Although Nigeria is blessed with rich oil reserves, one of the local paradoxes of the new millennium has been the inability of the country to produce enough fuel for domestic consumption, let alone, exports.

With most of the local refineries in a state of disrepair and others working below capacity, Nigeria has had to export most of its petroleum in the crude form while paying more to buy back refined petroleum products. This has taken a toll on the economy. 

Getting Nigeria’s oil sector working again has been identified as instrumental in boosting the local economy and Dangote’s most recent project is aimed at achieving just that. Nigeria would be leaning on Dangote to enrich the local market while working to get some of the local refineries up and running again. And maybe, only then, will the country begin to realise the full potential of its oil and gas sector.

“It’s worth it,” Kyari said of NNPC’s refinery overhauls, adding that Nigeria could become a fuel supplier to the entire region. “Africa needs refining capacity,” he said.

While Nigeria is considering both government and private funding in its oil sector after the refinery rehabilitation, third parties would maintain and operate the state-owned refineries to ensure reliable production. Italy’s Maire Tecnimont is already working on the Port Harcourt plant, with Italian refiner, ENI, contributing as an adviser. 

For many years, the NNPC been marred by allegations of shady operations and the corruption that hovers over some of its dealings, but new GMD, who took over from the retiring Maikanti Baru in June, said he will soon begin publishing the full list of those holding the nation’s crude oil contracts and the firms who won deals to swap Nigeria’s crude oil for products, along with audited accounts of NNPC’s books, to usher a regime of transparency.

He said the openness, and a plan to improve commercial terms for oil companies, would spur investment that has been hampered by uncertainty and opacity.

Kyari also hinted at the government’s general intention of selling its stakes in local refineries to less than 40 percent, though there’s currently no framework in place with which to follow through with that plan, implying that everything will remain on hold for now.

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