Four indigenous Exploration and Production and one International Oil Company (IOC) are expected to supply gas and crude to the much-awaited $12 billion Dangote Refinery.
Industry sources expect that at a stage in the operation of the Dangote refinery, local players like Lekoil, Amni International Petroleum, Sunlink Petroleum and First Exploration and Development Company would play a key role in the supply of gas to the refinery.
The $12 billion Dangote refinery, an hour east of Lagos, will begin to stream and is due to hit full capacity by mid-2020.
It will be the world’s largest single-train oil refinery. Still, many stakeholders are curious on update on the pipelines installation and how the refinery plans to get gas to power its plants and factories.
According to insider sources in the Dangote refinery, the refinery is expected to source crude from anywhere globally which will depend on some technical and other commercial factors.
“The gas will be sourced from Nigeria through Nigerian Gas Company Limited (NGC) and other upstream partners,” the source said, but declined to give further comments concerning the matter.
Renaissance Capital, an emerging and frontier markets-focused investment bank, expects Lekoil’s Ogo field to be among the main suppliers to Dangote’s refinery.
“Lekoil’s Ogo field is strategically located close to the refinery, implying it could be a supplier of gas and crude to the refinery,” RenCap’s Temilade Aduroja said in a recent publication.
China Harbor Engineering Co and China’s Offshore Oil Engineering Company (COOEC) recently began laying 48-inch underwater pipelines to convey crude to the refinery, sources told BusinessDay.
The pipeline project is part of Dangote’s gas pipeline, fertiliser, petrochemicals and refinery projects.
The work-scope includes transportation and installation of nine sub-sea pipelines with a total length of 100 kilometres in water depths of up to 40 metres. Of the pipelines, six are 24-inch diameter and three are 48-inch.
The Chinese contractors will also install five single-point mooring systems, a catenary anchor leg mooring buoy weighing 240 tonnes, and pipeline end manifold carrying a total weight of 220 tonnes for a shuttle tanker that imports crude for the refinery.
The refinery will have the capacity to refine 650,000 barrels of crude oil per day, the petrochemical plant will produce 780 KTPA Polypropylene and 500 KTPA of Polyethylene, while the fertiliser project will produce 3.0 million metric tonnes per annum of Urea.
In addition, Dangote Industries Limited is promoting an East West Offshore Gas Gathering System (EWOGGS) project which consists of a 1,100km length sub-sea gas pipeline with capacity to handle 3 Bscf/d of gas.
The current gas consumption by factories, power plants and gas-based industries in Nigeria is slightly less than 2 billion cubic feet per day (Bcf/d). The main constraint to growth is inadequacy in the supply of natural gas.
According to sources, the list of acreages from which the EWOGGS is expected to extract natural gas includes America’s ExxonMobil-operated OMLs 70 and 138, Amni International Petroleum-operated OML 52, Shell operated OML 77, Sunlink Petroleum-held OML 144 and First E&P-held OMLs 71 and 72, in which West African E&P, a Dangote subsidiary, has significant stake.
“The starting point for the pipelines is a new-build platform in OML 72, gathering gas from the hub with OML 52. The pipeline system consists of 7 gas receiving and 2 gas off-take subsea tie-in points along the route,” sources said.
Other sources said a Dangote document actually lists OML 138 as scheduled to provide 10 percent of the 3Bcf/d EWOGGS capacity, but ExxonMobil does not have any agreement yet with Dangote Industries Limited, nor does Shell.
Industry sources said Sunlink has been desperate to monetise its gas in OML 144. As such, it is keen to get on board while First E&P will deliver on OMLs 71 and 72, but it’s not clear what arrangement Amni International Petroleum has with Dangote.
When contacted, an insider source in Dangote Refinery said he can’t confirm or deny these contracts arrangements because the discussions surrounding the sources of gas are treated with confidential agreements.
Dangote Industries’ expectation is that Africa’s most populous country should be able to utilise 10 billion cubic feet of gas per day in its power plants and factories by 2020.
In the last 12 years, the state has built over 10 thermal power plants with nameplate capacity in excess of 5,000MW, expected to be fuelled by natural gas. But the volume available has been held down by “insufficient Investment focus to grow the required supply capacity”, according to a concept note by the Dangote Group, which it shared with Nigeria’s Vice President Yemi Osinbajo in 2016.
The bulk of the gas produced for the Nigerian market is for electricity, an industry considered rather unstable at the moment.
Speaking at the Oxford Business Forum Africa 2019, Sahara Power Group’s Managing Director Kola Adesina said the available gas in Nigeria can power the whole of West Africa if the right infrastructure and facilities are put in place.
Other gas and power analysts have lamented the obstructions imposed by off-take assurances vis-à-vis pipeline tariffs, funding mix and failure of payment guarantee structures.
And yet there are projects under construction and in feasibility studies. Shell and Seplat are collaborating on the Assa North Ohaji South (ANOH) project, which will deliver 600MMscf/d at peak to the Nigerian market.
Meanwhile, Aliko Dangote, president/CEO, Dangote Group, said the Dangote Refinery seeks partnership with the NNPC as a collaborator rather than a competitor, noting that the refinery would rely heavily on the Corporation’s invaluable knowledge of the refining business in Nigeria to achieve its central objective.
Dangote stated that upon completion, the refinery would dedicate 53 percent of its projected 650,000 barrels per day refining capacity to the production of petrol.
“The most important thing for us is to see how we can partner with NNPC. We would like NNPC to be part of us and we also want to be part of NNPC. I think that is the only way we can achieve a win-win situation,” he said.
DIPO OLADEHINDE, Lagos & HARRISON EDEH, Abuja
