Dangote’s proposed refinery sees progress as India’s EIL wins $139m contract

The ambitious plan by Dangote Group to build a 400,000 barrels-per-day refinery in Nigeria is picking up pace, with the disclosure of an award of a $139 million contract to India’s Engineers India Limited (EIL) by the Group.

The contract won by the state-owned Indian firm is for the provision of project management consultancy (PMC) and engineering, procurement and construction management (EPCM) services for the Dangote’s refinery and polypropylene plant.

According to A K Purwaha, EIL chairman and managing director, according to Press Trust of India, under the agreement, EIL will provide project PMC and EPCM services for implementing a grassroots 400,000 barrels per day (20 million tons) refinery and 600,000 tons a year polypropylene plant.

It would be recalled that Aliko Dangote, Africa’s richest man and business mogul, in April 2013 had 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 have said that Dangote’s foray into the oil sector has the prospect of shaking up Nigeria’s stagnant oil and gas industry, adding that they expect the refinery to help cut Nigeria’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.

EIL, a leading engineering consultancy and EPC company, is looking at markets abroad to more than double its revenue to $1 billion in the next 3-4 years.

“We are strong in refinery, petrochemicals, pipelines, upstream oil and gas projects and metallurgy. We are now looking at diversifying into nuclear energy, water and waste management and solar thermal projects,” Purwaha was quoted as saying.

“We are looking more focusedly on overseas markets particularly in Middle-East, Africa and South East Asia,” he said. “We are targeting 20 percent of our revenues from overseas market.”

The company, which reported a net profit of Rs 628.58 crore on a turnover of Rs 2,505.97 crore in 2012-13, is targeting more than double of the turnover to $ 1 billion.

EIL has already re-entered the fertiliser sector and is doing projects in Bangladesh, Indonesia and Nigeria.

“We are looking with beinterest in diversifying into high growth areas where we can provide high quality of engineering skills and knowledge,” he said.

Right from executing its first refinery project in Madras Refinery in 1967, EIL has its footprint in 19 of the 22 operating refineries in the country with a combined capacity of more than 150 million tons.

EIL has also been involved in the establishment of 7 of the 8 mega petrochemical complexes in India.

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.

Femi Asu with Agency Report