In a move to feed its plan to build Africa’s largest oil refinery in Nigeria, the Dangote Group is looking to acquire oil assets from Chevron and Shell, BusinessDay has learnt.
Aliko Dangote, business mogul and Africa’s richest man, intends to buy the two companies’ tracts of oil-rich swamp,and would bury pipelines to and from the refinery, to protect the oil from bandits, it was gathered.
Dangote is trying to line up oil and gas to feed the planned refinery, which is expected to come on stream in 2016.
The facilities Dangote Group is negotiating to buy were initially intended to serve the botched Olokola Liquefied Natural Gas plant project, in which Chevron and Shell, in conjunction with the Nigerian National Petroleum Corporation (NNPC) were partners.
The Olokola LNG project was originally designed to consist of a marine berth for offloading LNG, along with four LNG trains, each with 5.5 million tonnes per annum (MTPA) capacity.
The first and second phases of the construction were designed to complete two trains each, resulting in a 22 mtpa project capacity.
The project was for gas producers/owners to send natural gas to the facility, where it would be converted to LNG for a fee and pumped into the owners ships for transmission to the market.
Chevron has operations at Igbokoda in Ondo State,from where it could have easily provided the much need feedstock for the OKLNG.
The Olokola Liquefied Natural Gas project is located between Ogun and Ondo States.
The project was designed to develop an LNG and Natural Gas Liquids facility in the Olokola area of Ogun state. The launch project was 2 X 6.3 million tonnes per year of LNG, with ultimate capacity up to 35 million tonnes per year. LPG production was projected at 30,000 barrels per day, while up to 15,000 barrels per day of condensate were projected to be produced.
Chevron had awarded the Front End Engineering Design (FEED) work to a joint venture between Foster Wheeler and National Engineering & Technical Company (NETCO) for the gas wellhead platforms and pipelines portion of Chevron’s OK Gas Supply Project.
The offshore terminal will collect gas from offshore fields and transport up to 2.3billion cubic feet/day Bcf/d of natural gas to the OK LNG plant.
Industry watchers anticipated that the Dangote Group will purchase and blow the dust of portions of this facility, to save on cost and speed up time to market.
In June 2013, Chevron announced its plan to divest from its 40 percent stake in Oil Mining Leases (OMLs) 52, 53, 55, 83 and 85. The firm is currently selling three of the five fields, but is faced with legal challenges.
In October, Shell had also announced that it was putting up for sale, four additional onshore oil blocks,OMLs 18, 24, 25 and 29, with a combined production capacity of 70,000 bpd.
“We’re seriously thinking of investing in oil blocks, both for gas and for oil. We’ve started talking with some companies who are divesting from onshore,” Devakumar Edwin, group executive director, Dangote Cement Plc. was quoted by Bloomberg as saying.
It would be recalled that Dangote in April 2013 disclosed his intention to build a 400,000 barrels-per-day refinery in Nigeria, as well as petrochemical and fertiliser plants at the Olokola Liquefied Natural Gas (OKLNG) Free Trade Zone in Ondo State.
Analysts say Dangote’s foray into the oil sector will likely shake up Nigeria’s stagnant oil and gas industry, adding that they expect the refinery to help cut the country’s oil import volumes significantly, while also helping to deal a blow on the opaqueness around the subsidy management system.
The Group will spend $9 billion to build the largest privately owned refinery, which would double the country’s maximum refinery output.
In September last year, a significant milestone towards the construction of the refinery was reached, with the signing of a term loan between Dangote Group and a consortium of local and foreign banks for the financing of the project. Dangote Industries clinched a $3.3 billion syndicated loan from the banks, which will augment its equity contribution of $3.50 billion.
The company,which has interests from cement to sugar, also needs energy for its cement plants in the country, Edwin said.
Dangote Group believes it can manage unrest and aggrieved communities in the region with corporate social initiatives, he added.
“We know the terrain much better, we know the risks and we believe that the risks can be managed,” he said. “The primary risk is people blasting your pipelines. I wouldn’t like to go and invest in a block which is totally inland and then I have to start buying inland pipelines.”
Nigeria is Africa’s top oil producer and the continent’s second-biggest economy, but still relies heavily on imported refined petroleum products for the servicing of its economy, creating a lucrative market for European refiners and oil traders at the expense of the Nigerian masses.
The country has four refineries located in Port Harcourt, Warri and Kaduna, with a combined capacity of around 445,000 bpd or 70.75 million litres per day, but they operate well below full capacity, owing to decades of mismanagement and corruption.
Diezani Alison-Madueke, minister of petroleum resources, late last year had said the federal government would privatise the four state-owned refineries, generating mixed reactions from stakeholders and industry watchers.
In what has being widely described as a reaction to the strike threat by the Nigeria Union of Petroleum and Natural Gas Workers(NUPENG) over the proposed sale of the refineries, President Goodluck Jonathan earlier this month said there were no plans to sell them.
By: FEMI ASU