January 28, (THEWILL) – Those banking on the newly inaugurated Dangote Refinery and Petrochemical Company to ease the burden of high cost of petroleum products, such as Premium Motor Spirit (PMS), also known as petrol; Automotive Gas Oil (AGO), otherwise called diesel, and Jet A (aviation fuel), will have to adjust their expectations elastically.
This is because the 650,000 barrels per day refinery, in reality, will not commence actual production and supply of these commodities, or other petro-chemical products, in the next three to six months, according to findings by THEWILL.
The milestones
After the commissioning of the refinery by former President Muhammadu Buhari on May 27, 2023, amid high expectations of ameliorating the impacts of the imminent fuel subsidy removal by the then in-coming Bola Tinubu-led government, the Dangote Group on January 12, 2024 (over seven months after commissioning) announced that the facility had commenced production.
In a copious statement entitled ‘Dangote Refinery Starts Production’, the Group thanked President Tinubu for making the dream of starting production a reality. It also thanked the nation’s oil company, Nigerian National Petroleum Company Limited (NNPCL) and its subsidiaries for the support in taking the refinery to the level of actual production.
The statement read in part, “Dangote Petroleum Refinery has commenced production of diesel and aviation fuel.
“President of Dangote Group, Alhaji Aliko Dangote, elatedly thanked President Bola Ahmed Tinubu for his support, encouragement and thoughtful advice towards the actualisation of this project.
“Dangote also thanked the Nigerian National Petroleum Company Limited (NNPCL), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and Nigerians for their support and belief in the historic project.
“We thank President Bola Tinubu for his support and for making our dream come true. This production, as witnessed today, would not have been possible without his visionary leadership and prompt attention to details.
“His intervention at various stages cleared all impediments thereby accelerating the actualisation of the project.”
The statement continued: “We also thank the NNPC, NUPRC and NMDPRA for their support. These organisations have been our dependable partners in this historic journey. We also thank Nigerians for their belief and support in this project.
“We have started the production of diesel and aviation fuel, and the products will be in the market within this month once we receive regulatory approvals.
“This is a big day for Nigeria. We are delighted to have reached this significant milestone. This is an important achievement for our country as it demonstrates our ability to develop and deliver large capital projects. This is a game changer for our country, and I am very fulfilled with the actualisation of this project.”
Outlet strategies
Following the development, Dangote Refinery announced that it had commenced registration of distributors for the lifting and distribution of refined petroleum products across the country.
According to the company, members of three prominent associations that constitute 75 per cent of the total market in Nigeria had been registered.
The associations are: the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), the Independent Petroleum Marketers Association of Nigeria, (IPMAN), and Major Oil Marketers Association of Nigeria (MOMAN).
The company added that it was also considering other marketers that had signified interest in the lifting and distribution of its petroleum products in the country.
Contrary as fact
Two weeks after the “start of production”, Dangote diesel and aviation fuel are yet to be seen in the market.
All the marketers and distributors who spoke with THEWILL over the weekend, claimed that they had neither seen nor received the Dangote diesel and aviation fuel.
When contacted, the Chief Corporate Communications Officer, Dangote Group, Mr Anthony Chiejina, told THEWILL by telephone that production was ongoing at the Refinery. He stressed that refining involves chemical reactions that takes some time and urged Nigerians to avoid towing the path of skepticism about the project as some critics had done.
However, industry experts who are familiar with the works of the refinery, told THEWILL, on a note of disappointment, that Nigerians and the government are putting high expectations on Dangote Refinery beyond what is reasonable. They further argued that the government should not put pressure on Dangote to perform magic because refining is a careful process that must be handled professionally.
According to the respondents who preferred to speak on point of anonymity because of their relationship with Dangote Group and some government officials, refineries are constructed on particular industry specifications (specs) that cannot be compromises.
Dangote Refinery had earlier confirmed receiving crude supplies towards starting production. The industry experts explained that the products received by the refinery were meant to test the specs because the facility is new, and the process takes between three and six months to complete.
“The process is technical and has to be done meticulously. The Fluid Catalytic Cracking Unit (FCCU) which is at the heart of refining, the Columns, the Heat Exchangers, Isomerisation, Alkylation, Catalytic Reforming and other key processes have to be aligned with the refinery installations, and this takes time. I do not see Dangote Refinery commencing commercial production earlier than six months from now,” a Port Harcourt-based Petroleum Engineer told THEWILL in a note.
He added that the massive pipeline architecture would have to be joined with the appropriate mechanical seals, while the metering systems and loading bays must be installed in accordance with international standards.
Oil and gas investment expert, Dr Nnaemeka Ohiaraeri, confirmed the position of the respondents. In a note to THEWILL, the former NNPCL senior member of staff said Dangote Refinery will start actual production mostly in the second quarter.
The experts believe that the Federal Government seems to be putting undue pressure on Dangote Refinery and linking its hopes on the new facility in a manner that overlooks the fact that the facility is a private enterprise. They maintain that Dangote cannot play the role of the government which has abandoned its refineries for many years and blamed the National Assembly for the failure in its oversight functions.
For instance, the Senate, at plenary, constituted a special committee on October 24, 2023 to investigate the contracts awarded for the rehabilitation of all state-owned refineries said to have gulped N11.35 trillion in 13 years; and the committee was given one month to submit its report.
Three months after it was inaugurated, the outcome of the committee’s assignment is yet to be announced by the Senate. Yet all eyes are on Dangote to meet the energy needs of Nigerians.
‘Wrong Eyes’ on Dangote
Some stakeholders argued that the Federal Government has elevated Dangote Refinery to a state priority over the dormant refineries, which are still consuming huge resources. This attitude played out at the recent Nigerian Economic Summit Group (NESG) event in Lagos keynoted by the Governor of the Central Bank of Nigeria (CBN), Dr Olayemi Cardoso.
“The anticipated moderation in the pump prices of Premium Motor Spirit (PMS) due to the expected operational status of the country’s key Government and privately-owned refineries in 2024 is a pivotal factor in the economic equation.
“The expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience,” Dr Cardoso said in his speech at the launch of the NESG Macroeconomic Report 2024, in Lagos on January 24, 2024.
The Group Managing Director of NNPCL, Mr Mele Kyari and the former Minister of State for Petroleum, Timiprie Sylva, continued to sing the chorus of Dangote Refinery as the much awaited solution to Nigeria’s energy crisis while downplaying the state of the moribund refineries. Yet, the Port Harcourt Refinery failed to start production last December as promised by the government.
Deeper concern
Besides delayed production, of deeper concern is the fact that the $19 billion Dangote Refinery may not commence the production of PMS any time soon. Incidentally, this is where the expectations of Nigerians, who are paying hugely for petrol, lie.
“If Dangote Refinery will not produce petrol any time soon, yet we have to wait for about six months to see AGO and aviation fuel, it should be clear to the citizens that Dangote is not the answer to Nigeria’s energy crisis,” said Engr. Ken Akhimien, a Chemical Engineer, adding that Dangote will not perform magic to please the government or the people.
The refinery located at the Lekki Free Zone of Lagos state, has so far received six million barrels of crude oil at its two Single Point Mooring (SPMs) located 25 kilometres from the shore. The first crude delivery was done on December 12, 2023, and the 6th cargo was delivered on January 8, 2024.
According to Dangote Group, “The Refinery can load 2,900 trucks a day at its truck-loading gantries. The products from the Refinery will conform to Euro V specifications. The refinery design complies with the World Bank, US EPA, European emission norms, and Department of Petroleum Resources (DPR) emission/effluent norms, employing state-of-the-art technology.”
THEWILL had reported that the inauguration of the Dangote Refinery by former President Buhari, at the twilights of his 8-year administration on May 28, 2023, constituted a symbolic commissioning of a facility that would not commence production earlier than the first quarter of 2024
As Nigerians battle economic hardship resulting from the removal of fuel subsidy, the benefits expected from the Dangote Refinery may not materialise any time soon.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
