Nigeria’s Colossal Dangote Refinery Set to Ignite Operations in October with 370,000 b/d Output
The much-anticipated Dangote Refinery hailed as a game-changer for Nigeria and sub-Saharan Africa, is poised to receive its inaugural shipment of crude within the next fortnight.
Operations are slated to commence in October, with an initial output of up to 370,000 barrels per day (b/d) of diesel and jet fuel, according to a senior executive from the Dangote Group.
In an exclusive interview, Devakumar Edwin, the Executive Director of Dangote Group overseeing the $19.5 billion refinery, provided insights into the intricate production timeline, shedding light on the flows of crude and finished products, while also addressing a series of complications and delays that have beset the project since its inception in 2013.
“Right now I’m ready to receive crude,” stated Edwin, formerly at the helm of Dangote Cement. “We are just waiting for the first vessel. And so as soon as it comes in we can start.”
Once operating at full tilt, with a planned capacity of 650,000 b/d, the refinery promises to render Nigeria self-reliant in fuels, with a surplus available for export.
Presently, Africa’s largest producer relies on imports for its refined products, depleting its foreign exchange reserves.
However, setbacks and budget overruns prompted doubts about whether Aliko Dangote, Africa’s wealthiest individual, would ever bring the project to fruition.
Concurrently, fuel prices in Nigeria have surged following President Bola Tinubu’s termination of a costly subsidy in late May.
Staggered Rollout
Edwin outlined that the refinery, officially inaugurated by outgoing President Muhammadu Buhari in May, will kickstart operations in phases.
By October, the crude distillation unit, sulfur block, and hydrogen plant are expected to be operational, producing between 350,000 and 370,000 b/d of diesel and jet fuel.
Then, on November 30, the refinery will embark on a phased ramp-up to reach 650,000 b/d, with roughly half dedicated to gasoline, a pivotal segment of Nigeria’s fuel demand.
Analysts from S&P Global anticipate that the refinery will not reach full operational capacity until mid-2025, and further delays cannot be discounted.
Nevertheless, S&P Global’s projections indicate that Nigerian gasoline production will outpace imports until the 2040s, thanks to the refinery.
While the refinery was designed to process Nigeria’s light sweet crude, the state-owned Nigerian National Petroleum Corporation (NNPC), a stakeholder in the project, will not be able to supply the refinery until November, Edwin noted.
Consequently, Dangote is procuring oil from trading houses. Vitol and Trafigura recently conducted inspections of the facility, he confirmed.
“At the last minute [NNPC] said, ‘We have actually committed our crude on a forward basis to someone else’, so immediately they don’t have the crude,” he remarked. This, he assured, is a temporary hiccup, and by November, the refinery should be exclusively fueled by Nigerian crude.
Edwin clarified that the Nigerian oil will be acquired in US dollars, not in naira as some reports had indicated, due to its location in a free zone on the outskirts of Lagos. However, NNPC will provide some crude at reduced prices owing to its equity stake.
The magnitude of the refinery, Edwin emphasized, necessitated caution against complete dependence on Nigerian crude.
This implies that the refinery can handle a broad spectrum of African crudes, except for the heavier Angolan grades, in addition to Middle Eastern Arab Light and even US light-tight oil.
Distribution of Outputs
Dangote’s ambitions extend beyond the Nigerian market for its refined products. “Basically if you look at our production profile, 50% of my production will meet 100% of the requirements of the country,” asserted Edwin.
Surplus gasoline, meeting Euro 5 quality standards with 10 ppm sulfur content, will be shipped to other African markets, as well as to the United States and South America, albeit in relatively modest volumes.
Simultaneously, jet fuel will find its way to Europe, while diesel will be available in sub-Saharan Africa.
In Q1 2023, Nigeria imported 383,400 b/d of gasoline and diesel, as per data from S&P Global Commodities at Sea. This figure dipped to 193,000 b/d in Q2 following the subsidy withdrawal.
Edwin elucidated that refined products can be transported from the refinery either by road or by sea, with the latter routes capable of handling 75% of production.
Cognizant of the theft and vandalism of pipelines in Nigeria in recent years, which according to NNPC, accounts for a loss of 400,000 b/d of crude, Dangote has exclusively linked its pipelines to single buoy moorings in its custom-built port.
Edwin assured that these moorings can accommodate Very Large Crude Carriers (VLCCs) and even Ultra Large Crude Carriers (ULCCs). “I can load a Suexmax in a day, I can offload a VLCC in a day,” he affirmed.
The company is also in the process of widening the road connecting the refinery to the expressway, with completion at 70%, according to Edwin.
Overcoming a series of Delays
While discussions were initiated as early as 2013, Edwin disclosed that Dangote only commenced physical construction five years ago, following a string of setbacks and mishaps.
The initial plot of land in a free zone in Ogun state was abandoned due to potentially “catastrophic” political interference, he recounted.
After acquiring 33 square km of land in Lagos state for $100 million, the team discovered that over 70% of the plot was marshland, necessitating a year for clearing.
Additionally, faced with the prospect of rising sea levels jeopardizing the land over the next seven decades, Dangote invested $50 million in elevating the land by 1.5 meters.
“We had to hire the world’s largest dredger, second largest dredger, and third largest dredger to… pump in about 65 million cubic meters of sand.”
The company also had to construct a port capable of receiving extremely heavy assembled equipment, as it lacked the infrastructure to assemble equipment within Nigeria.
This entailed importing 200,000 pikes to avert sinking, procuring 320 cranes, and investing in a 10-million-ton-per-year granite quarry.
Ultimately, Edwin asserted, the delays turned out to be a blessing. “we had time to increase the capacity of the refinery [and] improve efficiencies in the design.” What will be the world’s largest single-train refinery began life as a 300,000 b/d project, Edwin revealed.
Future Investments
Edwin, who joined the Dangote Group in 1992, emphasized that the refinery would be of immense benefit to the nation, ensuring a steady supply of eco-friendly refined products and injecting a substantial amount of foreign exchange into the economy.
Moreover, it will alleviate the fuel supply crisis in import-dependent West Africa, where the recently eliminated fuel subsidy in Nigeria created a thriving underground market for gasoline amidst price fluctuations.
“The money will be coming back in, and it will go for further investments,” stated Edwin. “[Aliko Dangote] is from Nigeria and his focus is always on Nigeria.”
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