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Dangote refinery…Game changer gathers steam

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Dangote Oil Refinery Company

Daily, about 126 heavy-duty trucks jot across a massive land area that is seven times the size of Victoria Island.

This is aside the 750 heavy-duty equipment stationed in what is clearly one of the biggest construction projects in any part of the world.

When completed, the site, which underneath lies 300, 000 cubic feet of pilled concrete, that is temporary home to heavy earth moving equipment, bulldozers, excavators, bobcats, compactors, as well as iron/steel plates and pipes, among others, will be harbouring the largest single train petroleum refinery in the world, as well as a fertiliser plant reputed as the world’s second largest urea plant, producing three million tons per annum etc.

This month, production activities will commence in an aspect of the facility located as the train one of the fertiliser plant is expected to come on stream

Indeed, part of the heartwarming news is that the refinery, which is just an aspect of a $12b investment by Africa’s richest man, Aliko Dangote, can meet 100 per cent of the country’s requirement of all liquid products, ranging from petrol, diesel, kerosene to aviation fuel, and also have surplus of each of these products for export.

Furthermore, the gas project of the facility has the largest sub-sea pipeline infrastructure in the world. It boasts 1, 100km and meant to handle 3.8 million SCF of gas daily.

All these came to light recently when a delegation from the Nigerian Union of Journalists (NUJ), and the Nigerian Institute of Public Relations (NIPR) took a tour of the complex being built by Dangote Industries, at the Ibeju-Lekki Free Trade Zone, during their tour of the complex.

Summarising benefits that would accrue to the country from the investment, the Group Executive Director, Strategy, Portfolio Development and Capital Projects, Dangote Industries Limited, Devakumar Edwin, said when completed, the project will deliver to the country, “the largest single train petroleum refinery in the world – (650, 000 barrels per day capacity) with 838 KTPA polypropylene plant, the world’s second largest urea plant, the largest sub-sea pipeline infrastructure in the world, world-scale gas treatment stations, world-class petrochemical complex, a 480 MW power plant in refinery and fertiliser complex, and a 500 KTPA polyethylene plant.”

With all these in place, the Dangote chief explained that the refinery designed for 100 per cent Nigerian crude with flexibility to process others, apart from meeting and surpassing the country’s gasoline needs, would also create market of $11b per annum for Nigerian crude, even as it possesses strategically located marine infrastructure for crude receipts and product trade.

When completed, the facility would generate over 100, 000 indirect employment (retail outlets), and lead to the establishment of 26, 716 filling stations and 129 depots in the country.

It is also expected to lead to the revival of 11, 000 filling stations shutdown due to product shortages, engender ease of availability of product, facilitate the opening up of service stations and create additional jobs for 2, 600 trucks drivers involved in product transportation.

Even before fully coming on stream, the refinery and petrochemical complex is reasonably changing the country’s economic landscape with at least 120 companies providing goods and services valued at over N148b on site.

The impact that it currently has on the country’s economy also finds expression in the 37, 500 people, most of them Nigerians that are carrying out different construction works in the complex. This includes 250 youths from the refinery’s host communities that have been trained as artisans and given direct employment as part of the outfit’s corporate social responsibility.

Edwin said: “These are youths who do not have the requisite education and skills that can qualify them for jobs in the refinery and the other segments of the business, which we selected and trained to acquire relevant skills in partnerships with the Lagos State government and Siemens in order to reduce unemployment in the state, and also to engage them productively to contribute to the growth of the Nigerian economy.”

Expected to operate at full capacity from Day One, product from the refinery will go a long way in solving the problem of dirty fuel that most Nigerian motorists are constrained to purchase, which overtime compromises their vehicles.

According to Edwin, “Fuel imported into the country is not clean fuel, and that is the reason we spend a lot of money to clean fuel before use at our Obajana cement plant.

The dirty fuel in circulation in the country sure has negative effect on cars. Our refinery when completed would have capacity to refine crude from different parts of the world as we would produce Euro V products since the refinery is designed to process large variety of crudes, including all African crudes, a range of Middle Eastern crudes and United States crudes.

Part of our business strategies is not to invest in expensive units like Delayed Coker/VDU; minimise capital costs and project schedule; maximise gasoline, which is in high demand (53 per cent of the production capacity compared to 22 per cent of the existing refineries in Nigeria), as well as maximise value added petrochemicals polypropylene and polyethylene.”

The dearth of critical infrastructure in the country has also played a major role in jerking up the eventual cost of the entire project as Edwin said between 20 to 25 per cent of the total investment cost would be spent on putting in place support facilities, especially for the refinery, which has 47-day storage capacity, meaning that the country’s 30-day national consumption can be stored on site with ease. Evacuation of product from the complex can be done 75 per cent by road and 75 per cent by sea.

Speaking on supporting infrastructure put in place to support the project, Edwin said, “I would say that the cost of money spent to put infrastructure in place that would support this project is between 20 to 25 percent of the total cost of the investment. But there is also another issue. If we do not invest in infrastructure, the challenge of developing the project would be bigger.

However, If I were to go to a country where infrastructure are available and we do not have to spend so much to develop infrastructure, we may have had to pay for it one way or the other because nothing is available for free; you have to pay for these things. Probably, we may even end up paying much more than what we have used to put all these in place.”

The absence of outfits that have capacity to develop huge projects in the country, forced the Dangote Industries to radically upscale it expertise in construction works, and acquire machinery that would enable it take up extra large construction contracts.

Edwin explained: “We have bought over 750 equipment to enhance the local capacity for site works since even Julius Berger, Dantata & Sawoe, Hi-Tech and the likes were unable to handle even small portions of our construction requirement of heavy earth moving equipment, bulldozers, excavators, bobcats, compactors and front end loaders.”

Of all Dangote Group projects, it is only at Obajana Cement and the petrochemical complex that the Dangote Industries is the APC contractor. Asked the reason for this, the executive director said: “Obajana was our first major investment, and we spent about $1.2b in the first two trains, not all the expansions that we have done now. We were not the APC contractors at that time and there were three major contractors from across the world that applied.

Two from Germany and one from Denmark, but none of them was willing to take an APC risk in Africa, even though they do APC in more developed countries. According to them, it would be too big a risk for them to take in Africa.

So, we had to take the risk ourselves. But when it came to the refinery, the global term rule for investment in a refinery is $30, 000/ barrel. So, if we are talking about a 650, 000 barrels per day refinery, it means $30, 000 x 650, 000, which is about $19.5b.

At the end of the day, even when we resorted to the services of consultants, it was not practicable for us to engage in it, so that is why we decided to take the risks by ourselves. We have tried our utmost best to manage the project properly ever since taking up that role.”

Nigeria’s current consumption of Urea is 700, 000 tons. This is considered a very poor per hectare usage of fertiliser, and a leading cause of poor crop yield.

This development is unhealthy and obviously not in tandem with the Federal Government’s desire to diversify the economy by developing the agricultural sector.

This is likely to become history once the Dangote Fertiliser Plant, which is on the verge of commencing operation this month does so. The facility, the largest fertiliser plant in West Africa, would save the country, a whopping $500m annually on fertiliser imports.

Beyond the annual savings from import substitution, it would provide another $400m from export of fertiliser products, and this is in addition to thousands of direct and indirect jobs.

The fertiliser plant sited on 500 hectares of land, still has room for expansion as it currently occupies only a small percentage of the space allotted to it.

“By 2020, Nigeria’s population is projected to increase to about 207 million, which would lead to increased food production. Estimates indicate that around five million tons of fertiliser would be required per year in the country in the next five to seven years, bifurcated into 3.5 million tons of urea and 1.5 million tons of NPK, while current production levels are at 1.6 million tons by 2019,” Edwin said.

He added that with time, NPK and ammonia plant would be erected within the facility to further add to its offerings.

As a way of creating heavier impact, and as part of its corporate social responsibility, the Dangote chief said mobile laboratories would move round the country to test soil samples in order to design and customise products that would help farmers to improve yield and boost their income.”


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