There has been much furore over the Federal Executive Council’s recent approval for the Nigerian National Petroleum Corporation, NNPC, to acquire 20 percent stake in the upcoming Dangote Refinery.
The Federal Government through NNPC will invest $2.76 billion in the Dangote integrated energy project which was billed to be completed in 2022.
The approval came in the wake of NNPC’s plans to invest in some upcoming private refineries in the country which is in line with the corporation’s commitment to guarantee national energy security.
Since the announcement of the investment, excited Nigerians have expressed different views. Some think it is good investment while others think otherwise probably because they do not have sufficient information on what the Dangote refinery project is all about.
The fact remains that the Dangote project has the largest single train petroleum refinery in the world with the capacity to produce enough to meet Nigeria’s petrol needs and for export. It can meet 100 per cent of the nation’s requirement with refined products, namely 57 million litres of petrol per day, 27 million litres of diesel per day, 11 million litres of Kerosene per day and nine million litres of aviation fuel per day. There will be surplus of each of these products for export, to signal a new dawn for Nigeria.
But the investment in Dangote Refinery is a well-considered strategic move. The corporation had in May, this year, announced its intention to acquire an equity stake in the refinery, as well as in five other refineries that are in the development phase.
Firstly, the proposal to take a 20 percent stake in the Dangote Refinery is in line with a government directive stipulating the mandatory participation of the corporation in any privately owned refinery that exceeds 50,000 barrels per day capacity.
Secondly, the corporate objective of the corporation is designed to grow the domestic refining capacity and improve petroleum products supply from local refineries.
Thirdly, here is a sound justification in investing in a private sector driven project: A resource-dependent country as Nigeria cannot but show interest, and have a stake, in a business that borders on energy security and has fiscal security implications for the economy.
The facts behind the figures showed that NNPC’s acquisition translates to 130,000 barrels per day (bpd) capacity from the brand new 650,000 bpd Dangote Refinery for $2.76 billion, Hollyfrontier is acquiring 97-year-old 115,000 bpd refinery from Sinclair Oil for $2.6 billion.
Also, the deal signed by Hollyfrontier and its affiliate, Holly Energy Partners is to acquire almost all of Sinclair Oil’s refining, renewable diesel and logistics assets for $2.6 billion. It is not the same as the acquisition of the 20 per cent stake in Dangote Refinery by the NNPC.
“It is erroneous to assume that Hollyfrontier is buying 678,000 bpd refining capacity from Sinclair for $2.6 billion. Fact is: The combined business of Hollyfrontier and Sinclair will have a refining capacity of 678, 000 bpd after the acquisition. HollyFrontier already has refineries, and is only adding Sinclair’s two refineries, with a combined capacity of 115, 000 bpd to its portfolio,” an industry analyst said.
Above notwithstanding, of the 115,000 bpd capacity, the first refinery, with a capacity of 85,000 bpd, was built 97 years ago in 1924, while the second refinery with a capacity of 30,000 bpd, was built in 1992. The fact is that only two refineries are being purchased.
“It is therefore ‘unwise’ and unnecessary to compare a facility built 97 years ago with the modern, technology-driven Dangote Refinery,” the analyst said.