By Ayo Yusuf
More facts have emerged over the failure of Dangote Petroleum Refinery to begin production by late August as promised by the President, Dangote Group, Aliko Dangote.
During the official commissioning of his refinery by former President Muhammadu Buhari in May, Alhaji Dangote has said, “our first product will be in the market before the end of July or beginning of August this year.”
However, the refinery has not been able to refine a drop of fuel nearly a month after and the management of the company had been cagey about when the refinery would indeed begin operations.
However, in a recent interview with S&P Global Commodity Insights, the Executive Director, Dangote Group, Devakumar Edwin, hinted that the refinery missed its production deadline partly because the Nigerian National Petroleum Company Limited, NNPCL failed to meet the refinery’s demands on time due to its commitment to other entities.
He said Dangote refinery was therefore forced to make other arrangements to import crude oil until the Nigerian crude would be available to the company.
Although Mr. Edwin did not disclose which entities have been receiving NNPCL’s crude and thus delayed his company’s operations, he said the refinery is expecting its first crude cargo in two weeks’ time.
The Nigerian National Petroleum Company Limited which trades crude oil on behalf of Nigeria had last month disclosed that it had entered into a $3bn crude oil-for-loan deal with African Export-Import Bank.
The deal allowed the company to pledge future oil production to the bank as repayments for the loan.
It had announced the acquisition of the loan in a brief statement titled, ‘Relief for the naira: NNPC Ltd secures $3bn emergency crude repayment loan from AFREXIM Bank.’
The statement read, “The NNPC Ltd and @afreximbank have jointly signed a commitment letter and term-sheet for an emergency $3bn crude oil repayment loan.
“The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.”
Providing further explanation about the loan at the time, the Senior Special Assistant to President Buhari on Digital/New Media, O’tega Ogra, in several posts on X (formerly Twitter), explained that the $3bn was not a crude-for-refined products swap loan, but an upfront cash loan against proceeds from a limited amount of future crude oil production.
This confirmed that the national oil firm had really made commitments to other entities using the crude produced by Nigeria as collateral.
TheNewDiplomat gathered that NNPC had entered into similar crude oil contracts with a number of entities, a development which made it impossible for the organisation to meet Dangote’s needs on time.
A top official of the oil company, however, said plans were already underway to ensure Dangote’s refinery’s crude oil needs were met in November.
Mr. Edwin also confirmed that the importation of crude by Dangote refinery was a temporary measure as his firm would begin receiving supply from NNPCL from next month.
He emphasised the refinery’s readiness to receive crude oil, stating, “Right now, I’m ready to receive crude. We are just waiting for the first vessel. And so, as soon as it comes in, we can start.”
Regarding the shift in the original August timeline, Mr. Edwin clarified that the NNPCL had already committed their crude oil to another entity on a forward basis, causing his company a temporary delay.
He however said the setback was momentary, and that his refinery would soon run exclusively on Nigerian crude oil as from November 2023.
The executive director further stated that the firm would begin the production of up to 370,000 barrels per day of crude that would give rise to Automotive Gas Oil, popularly called diesel, and jet fuel in October 2023.
For Premium Motor Spirit, popularly called petrol, the Dangote Group’s boss said the plant would begin producing it by November 30, 2023.
Oil marketers have warned that the prices of diesel and jet fuel would only crash when the Dangote refinery starts receiving crude oil from Nigeria, and not by importing crude.
Mr. Edwin stated in the interview that the Dangote Refinery would initiate a gradual increase in petrol production, aiming to reach an impressive 650,000 barrels per day.
Meanwhile, Mr. Edwin has disclosed that the Nigerian oil would be purchased in US dollars, and not naira because the refinery is located in a free trade zone on the outskirts of Lagos.
He said the NNPCL would, however, supply some crude at knockdown prices due to its equity stake in the refinery.
Edwin further stated that, aside from heavy Angolan grades, the Dangote refinery could process most African crude grades, as well as Middle Eastern Arab Light and even US light-tight oil.
He said, “We can even take some of the Russian grades… if the global system opens up to allow us to receive them. Basically, if you look at our production profile, 50 per cent of my production will meet 100 per cent of the requirements of the country.
“Excess gasoline – which will be 10 ppm sulfur Euro 5 quality — will be exported to other African markets as well as the US and South America, although the volumes will be relatively small. Meanwhile, jet fuel will be exported to Europe and diesel will be sold in sub-Saharan Africa.”
He claimed that the refinery would be “enormously beneficial to the country” by establishing a reliable supply of “environmentally-friendly” refined products and bringing “a huge amount of foreign exchange into the country.”
Edwin also noted that the refinery would play a pivotal role in alleviating the fuel supply challenges faced by import-dependent West Africa, worsened by Nigeria’s recent removal of fuel subsidies, which had led to a thriving illicit gasoline market due to price fluctuations.
He added that the revenues generated from the refinery’s operations would be reinvested to fuel further developments, underscoring Aliko Dangote’s commitment to Nigeria.
“The money will be coming back in, and it will go for further investments. Aliko Dangote is from Nigeria and his focus is always on Nigeria,” Edwin stated.
Meanwhile, the National Secretary, Independent Petroleum Marketers Association of Nigeria, Chief John Kekeocha, said the Dangote refinery should start producing refined products, as the delay was becoming too long.
He, however, expressed hope that once the facility starts getting crude oil from NNPCL to produce diesel and jet fuel, the costs of the commodities would reduce in Nigeria.
“The prices of diesel and jet fuel will, of course, come down when Dangote starts refining in-country, provided it gets its crude oil from Nigeria. For the unit costs of importing the refined products will be removed, since we now produce them here,” Chief Kekeocha stated.
Other marketers expressed satisfaction with the report that the Dangote refinery would begin production in October.
The National Controller, Operations, IPMAN, Mike Osatuyi, said the beginning of petrol refining by the refinery in November would mean a corresponding end to petrol importation.
“It is good news for oil marketers, the masses and the Nigerian government. What this means is that we will soon get away from petrol importation forever. The Federal Government has 20 per cent shares in the refinery, so it is a great development for Nigeria and the Tinubu government,” he stated.
The Spokesperson for Dangote Group, Tony Chijiena, could not be reached immediately for comments.
TheNewDiplomat has reported that the Dangote refinery was yet to commence production despite a promise by Aliko Dangote that petrol from the facility would start flowing into the Nigerian market latest August.
