It is no longer news that Dangote’s 650,000 bpd capacity petroleum refinery will come on stream in 2022, all things being equal. What is however, news is that the Federal Government will be acquiring 20 percent of the equity of the business. This will give the government a seat and a say on the refinery’s board.
Ordinarily, being a private concern, the government is not supposed to lay any claims to the company’s shares but the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC) Melee Kyari in a media chat with the Channels Television on Tuesday, explained to Nigerians that the government’s policy for the country’s petroleum sector is that the federal government has a responsibility to acquire 20 percent equity from any petroleum refinery with capacity to refine over 50, 000 litres of petroleum product.
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Kyari disclosed that although Africa’s richest man and business tycoon, Aliko Dangote, does not want to sell shares in his refinery and petrochemical project undergoing construction in the Lekki Free Zone, Lagos, Nigeria, but he is left with no option for the security of the country’s petroleum sector. According to Kyari, it is important that the NNPC, as the national oil company, guarantees energy security for the country by “having a say in the board of the refinery”.
“There is no country that would watch a business of this scale, which is bordering on energy security, which also has high implications even on the physical security of our country and you watch it without having a say.
“For us as a strategy, we will take equity in very significant businesses that are anchored on the oil and gas operations – fertilizer, methanol plants, modular refineries and so many other businesses that we are dealing with so that we can expand our portfolio but also as the national oil company, we have the responsibility to guarantee energy security for our country and there is nowhere you can have that say except you have a say in the board of this institution,” he said.
The Dangote’s refinery, when completed, will bring some succour to the country’s almost insurmountable challenge of importing refined petroleum products. For so many years, the country has been grappling with the intractable task of rehabilitating its four refineries including two in Port Harcourt, the Port Harcourt Refining Company with a combined capacity of 210,000 bpsd, the Warri Refining and Petrochemical Company with 125,000 bpsd capacity and the Kaduna Refining and Petrochemical Company with 110, 000 bpsd. All four refineries have a combined capacity of 445,000 bpd.
Ever since the country’s four refineries packed up, successive governments in the country abandoned it and resorted to exporting crude oil to countries in Europe for refinement which imposed a heavy burden on the country because it has to go back to those countries to purchase refined products. Nigeria has been making fruitless efforts to rehabilitate the four refineries. In 2020, a total of N81.41bn was expended on the four refineries between January and August of that year, apart from billions of dollars expended by the past government to get the refineries working again.
The inability of the refineries to function opened windows of opportunities for private sector operators to indicate interest in investing in mini refineries with capacity to produce a few thousands of litres of petroleum. In spite of these efforts, the country continued to rely on import of refined products. A huge relief came to the government operators when Dangote announced his interest to bail out the country by building a refinery capable of producing 650, 000 bpd a capacity more than the country’s four refineries combined.
An elated Kyari announced to Nigerians during the interview that, “Dangote refinery will come to work, by 2022, it should come into production and what that should do is to deliver over 50 million litres of gasoline, to be specific, into our market.
“We are also working on our refineries to make sure we fix them; we have awarded the Port Harcourt refinery rehabilitation and ultimately we are close to that of Warri and Kaduna, so that very soon, in July, all of them will work contemporaneously and at the end of the day, we will deliver all of them.
“The net effect is that you are going to have an environment where Nigeria becomes a hub for petroleum supply. It is going to change the dynamics of petroleum supply, even globally, in the sense that the flow is coming from Europe today and it is going to be reversed to some other direction. We will be the supplier for West Africa legitimately and also many other parts of the world.
“The meaning of this is that there is an opportunity thrown at us and I am not sure that Mr Dangote wants to sell his equity in the refinery. I can confirm that it was at our instant that we started the engagement; he did not want to sell his shares in this refinery.
“I am not sure Mr Dangote is very happy with this. We are taking 20 percent equity of the Dangote Refinery. There is a valuation process; it is very international and regulated. No bank will give you money to buy a stake,” Kyari said.
Kyari, who affirmed that the NNPC is seeking the authority of the Federal Executive Council to close the deal, which he disclosed is worth about $19bn, said the fund for the purchase of the shares will come from banks because the banks would see the prospect of repayment
“We are not going to take government money to buy it, we are going to borrow because we know that this business is viable in the short term. Banks have come forward to lend us.
“We are very proud that we did this, this is good for our shareholders including all the 200 million Nigerians who will also be happily buying shares from this refinery if they have an opportunity but now we have done that on their behalf so that ultimately, the value will come to all of us,” the GMD added.
