The coming on stream of the much-awaited 650 barrels per day Dangote Oil Refinery would mean so much not only to the Nigerian oil and gas sector and its managers, individual interests and the local communities, but also to the wider Nigerian economy.
The Dangote refinery has been promoted as coming on stream in April 2020. Its management has said the crude oil refinery is expected to produce 65.4 million litres of petrol, diesel, aviation fuel and kerosene daily when it comes on stream. The refinery has been described as the world’s largest single-train refinery.
“That should be enough to meet local needs,” Ibe Kachikwu, former minister of state for Petroleum Resources, told an oil and gas conference in Cape Town, referring to the Dangote refinery.
Daily average consumption of premium motor spirit (PMS) currently stands at about 50 million litres per day, according to NNPC figures. Over 90 percent of this demand is imported.
Nigeria entered a new phase of its history as an oil exporting nation with the collapse of local refineries. That was when Africa’s biggest crude oil producer started relying on imported petroleum products to meet local demand.
The coming of the Dangote refinery, someone familiar with the matter said, would help the country preserve foreign exchange of around $16 billion a year at current market prices and save $10 billion a year through domestic supplies of petroleum products.
Bello Rabiu, chief operating officer, Upstream, Nigerian National Petroleum Corporation (NNPC), had said in April that the coming on stream of the Dangote 650,000 barrels-per-day refinery and efforts by NNPC to revamp the country’s refineries in Port Harcourt, Kaduna and Warri would help Nigeria to achieve zero importation of refined petroleum products.
Importation of petroleum products meant the development of facilities where these products would be stored before their onward delivery to the hinterland. Tank farms sprung up to fill this gap.
About 80 percent of tank farms in Nigeria are located in Apapa, Ibafon, and Coconut. An average tank farm in Apapa has a carrying capacity of 30 million litres. Close to 1,000 trucks come into Lagos daily for the purpose of lifting refined petroleum products, according to the National Association of Road Transport Owners.
With the imminent opening of the Dangote Refinery, which would imply a significant reduction in fuel importation into the country or local refining sufficiency for the country, industry experts have taken interest into what becomes of the tank farms and Apapa itself.
Apapa, Nigeria’s premier port city, is currently struggling with the siege and occupation of its territory by what looks like a mafia group that is unyielding even to brute force. The opening of the Dangote Refinery, when it happens, means a mixed bag of opportunities and challenges, the experts said.
The coming of the refinery means that all the tank farms, about 50 in number, scattered all over Apapa and serving as depots for imported fuel, may be rendered redundant, said one expert who did not want his name mentioned. What that means is that oil-related activities, including truck (tankers) traffic, in the port city may drop, he said.
But Ayodele Oni, energy partner at Bloomfield Law Practice, thinks differently.
“The tank farms will be re-characterised probably. This is simply saying their use will be modified but there will always be a need for storage facilities. This is even more so given that there is no viable rail network to move the refined products directly from the refinery to where they will be needed,” Oni said.
But in the event that the tank farms become redundant, the implication is that the Apapa property market will be further challenged. This is a market where over 40 percent of the residential buildings are empty. Rental income loss to landlords is estimated at N250 million per annum while vacancy rate in the entire port city is well above 50 percent.
These will be made worse by the offloading of ‘empty’ land where the tank farms currently sit. It is estimated that there are 50 tank farms, each sitting on approximately 10,000 square metres of land.
Chudi Ubosi, an estate surveyor and valuer, told BusinessDay on phone that before Apapa became what it is today, it was in the league of Ikeja GRA where land sells for between N200,000 and N250,000 per square metre. Apapa no longer commands such price.
“It is hard to get a buyer who will pay N100,000 per square metre of land in Apapa today,” Ubosi noted.
But even at that, N100,000 per square metre for 10,000 square metres of land multiplied by 50 tank farms translates into a lot of money (about N50 billion) that will be tied down for some time.
Uche Chiejina, an estate manager in Apapa, affirms these challenges, adding that at the moment, the Apapa market is down such that estate agents operating in that axis are idle while property owners/landlords have no income in terms of rents.
Ubosi says it might take a long while, up to 10 years, for Apapa to rebuild confidence in potential investors and patch up the degraded environment and decaying infrastructure post Dangote Refinery
Chiejina, on the other hand, sees opportunities for residential, retail and leisure investors. He noted that unless the state government and Dangote Group partner to build coastal roads that will lead trucks and other vehicular traffic out of the new refinery, infrastructure remains a huge challenge along the Lekki-Epe Expressway which is the only gateway in that axis.
This, he explained, would be a disincentive to people going to that area for business.
“Though Apapa is not Ikoyi where people are buying old structures, demolishing, redeveloping and people are buying, there is hope that people will come around to buy property,” he said.
Besides its closeness to the Island, Apapa remains home to Nigeria’s two busiest seaports, meaning that ports and other marine activities will continue to flourish in the port city. “Again, houses are still very expensive on the Island and so, people who like to be close to the Island but cannot afford its property would still buy Apapa property for investment or residence,” Chiejina said.
Bode Karunwi, vice chairman, Apapa GRA Residents Association, thinks differently.
“Unless there is a transport master plan for the upcoming refinery, what is going to happen is a transfer of problem from one location to another in Lagos. How Apapa is going to adjust to the opening of the Dangote Refinery is neither here nor there,” Karunwi said.
“Many Apapa residents and businesses have relocated to the Island including Lekki. Do we expect them to start coming back? What of the cost of relocating family or business which is not a small thing? For me, what should pre-occupy the minds of everybody is how to make the entire Lagos work,” he said.
CHUKA UROKO & STEVE ONYEKWELU
