Dangote refinery: Pathways, prospects and challenges

At long last, the Dangote Petroleum Refinery Project, Africa’s much-talked-about biggest oil refinery, has recently begun operations with the production of Automotive Gas Oil, also known as diesel, and Jet A1 or aviation fuel, thus ending the long years of waiting for a refinery that could boost refining capacity in a continent heavily reliant on imported petroleum products. The big question remains whether the coming on stream of the refinery will translate into lower prices of petroleum products, particularly petrol for Nigerians. But surely, the public enthusiasm greeting the refinery’s operation will hardly be sustained if the prices remain high.

The President of the Dangote Group, Alhaji Aliko Dangote, deserves commendation for the actualisation of his long-time dream; but he should not relent in his efforts until the refinery achieves its ultimate purpose and objectives for which it was established. Located in the prestigious Lekki Free Trade Zone on the eastern flank of the commercial city of Lagos, the Dangote refinery is expected to not only make abundant fuel in Nigeria but also to export fuel to neighbouring West African countries, potentially transforming oil trading in the Atlantic Basin.
  
As the refinery commences operations, the pertinent questions many Nigerians are asking are: Will the pump price of petrol be reduced? Will the Dangote refinery bring an end to the ceaseless, excruciatingly long queues at filling stations? What benefits will the ordinary Nigerian reap from the startup of the Dangote refinery? In answer, some analysts forecast that the startup of the Dangote refinery will not bring down the pump price of fuel. According to them, given the free fall of the naira currency against the U.S. dollar and considering the actual cost of running the Dangote refinery, including the refinery margin, taxes and levies, transportation to various filling stations across the country and the retailers’ margins, the Dangote refinery would be paying an average of about N530 per litre of the products it produces. As such, chances that its petrol would cost less than N600 per litre is a bit remote.
   
Whether or not the Dangote refinery will lead to a crash in fuel prices, it will, at least, contribute to boosting Nigeria’s economic growth. The refinery is designed to be the largest single-train refinery in the world, with a refining capacity of 650,000 barrels per day. This increased capacity will contribute significantly to meeting Nigeria’s domestic demand for petroleum products, reducing the need for imports. Nigeria has historically been dependent on importing refined petroleum products due to limited domestic refining capacity. With the Dangote refinery in operation, it is hoped that the situation where someone will come to Nigeria to get our crude oil, take it abroad, refine it, and bring it back to us to buy at a huge cost will be gone.

Already, seven major oil marketers in Nigeria have registered with the refinery for the lifting and distribution of refined petroleum products produced by the $20 billion refinery. The operation of the refinery is expected to generate a considerable number of direct and indirect jobs, including employment opportunities in the maintenance and ongoing operations of the refinery facility, as well as in the associated supply chain.
 
It is not unlikely that the Dangote refinery will lead to the development and improvement of infrastructure in the Lekki Free Zone areas of Lagos and its environs. This could include road networks, utilities, and other facilities to support the refinery’s operation. The refinery’s contribution to meeting domestic demand for refined products and reducing import costs can have a positive impact on Nigeria’s overall economic growth. A more stable and efficient energy supply can stimulate economic activities in various sectors in Nigeria.

The surplus refined products produced by the Dangote Refinery could potentially be exported to other countries, providing an additional source of revenue and foreign exchange for Nigeria. It is said that the refinery has so far received six million barrels of crude oil at its two single-point moorings located 25 kilometres from the shore. The first crude delivery was done on December 12, 2023, and the sixth cargo was delivered on January 8, 2024. The refinery can load 2,900 trucks a day at its truck-loading gantries.
    
It is important to note that the actual impact of the Dangote refinery will depend on various factors, including the refinery’s successful operation. There can be various challenges that might impact the smooth takeoff of a refinery. First and foremost, meeting environmental and safety regulations is crucial for refinery operations. Any delays or complications in obtaining necessary permits and adhering to regulations can impact the project timeline.

Alhaji Dangote should understand that the operation of a refinery involves complex engineering processes. Technical issues such as equipment malfunctions, design flaws, or unexpected technical hurdles could pose challenges. The supply chain for materials and equipment needed for operation must be well-managed. Delays or disruptions in the supply chain could lead to project setbacks. Besides, the Dangote refinery’s success is closely tied to efficient infrastructure and logistics. Challenges in transportation, storage, and distribution systems can hinder the smooth operation of the refinery.
 
More importantly, Alhaji Dangote should strictly adhere to local and international laws and regulations governing environmental protection, labour rights, and other relevant areas. He should ensure that the Lekki Free Zone environment where his refinery is situated does not suffer environmental pollution and expropriation. Apart from assessing the environmental issues of the areas and obtaining the necessary environmental clearances, he should incorporate eco-friendly practices and technologies to minimize the negative environmental impact of the refinery in the area. He should implement measures to control emissions and minimize air pollutants, such as particulate matter and greenhouse gases, to reduce the impact on the health of surrounding communities. Proper wastewater treatment should be ensured to prevent contamination of water bodies with harmful chemicals and pollutants.