The Dangote Lekki refinery

After decades of failure by the government to build modern refineries as solution to the incessant fuel scarcity in the country, a new dawn is breaking with the Dangote Lekki Refinery, a private sector investment by Alhaji Aliko Dangote, Nigeria’s foremost business tycoon, adjudged by Forbes as the richest man in Africa. Dangote represents a beacon of hope and inspiration in Nigeria.

His vision for business development in Africa and Nigeria in particular is incomparable and unprecedented. Nigeria is indeed blessed to have him as one of her eminent citizens. His impacts on the socio-economic development of the country resonate in different sectors of the economy.

The refinery is coming as a big relief to Nigerians, who have borne the brunt of the mismanagement of the country’s abundant oil resources. That Nigeria, until recently, the sixth largest oil producer in the world, has no functional refineries is confounding.

By embarking on the refinery project, Dangote has defied the lame argument that there is no profit in refinery business and that government cannot run a profitable refinery business. Sadly enough, successive administrations in the country bought into the falsehood and held down any move in that direction.

But that does not in any way stop government from creating the enabling environment for private operators to come in. Dangote’s refinery is therefore coming as a light at the end of a dark tunnel. There is no doubt that government is thrilled and in full support of the project.

Against that backdrop, Vice President Yemi Osinbajo, recently, went on an assessment tour of the project, accompanied by the Lagos State Governor, Akinwunmi Ambode, Chairman of Dangote Group, Alhaji Aliko Dangote, Minister of Power, Works and Housing and former Lagos State Governor, Babatunde Fashola, among others.

Osinbajo disclosed that the $12 billion project would be completed in the first quarter of 2019 and that the Federal Government would earn over N145 billion as income. He said the refinery has a capacity to refine 650,000 barrels per day.

Besides the economic gain of the refinery, which is of great importance, the refinery will put Nigeria in the league of countries with such facilities, thereby removing the shame and embarrassment the country and its people have suffered all these years as a result of recurrent fuel scarcity.

Being that the refinery is integrated with a petrochemical plant, a fertilizer plant and a subsea pipeline project, Osinbajo said by all projections, it is the largest in the world. He described it as an incredible industrial undertaking, possibly, the largest and most ambitious on the continent; truly inspiring.

The gas pipeline runs from Bonny through Ogedegbe, Olokola down to Lekki and Escravos, Lagos pipeline and the West African Gas Pipeline. Unlike the existing pipelines that were laid on the surface, which expose them to vandalisation and attack, the subsea pipeline is inaccessible and not prone to vandalisation or sabotage by militants.

The Lagos State Governor, Akinwunmi Ambode, said the project would create some 235,000 jobs both direct and indirect. He said the project would boost the economy of Lagos and Nigeria with its multiplier effect.

In his remarks, Alhaji Dangote said the target is that in five years time, half of Nigeria’s crude oil will be refined and exported rather than exporting crude that creates jobs elsewhere. What a wonderful prospect for Nigeria to join the league of countries exporting refined petroleum products!

It is heartening that Nigeria now has one of the largest refineries in the world. The largest refinery in the world is Jamnagar Refinery in Gujarat, India, which produces 1,240,000 barrels per day.

Certainly, the Lekki refinery has no rival in Africa. It has toppled South Africa’s Sapref Refinery, which is the largest in Africa producing 180,000 barrels per day followed by Egypt’s Cairo Mostorod Refinery with a capacity of 142,000 barrels per day.

A lot has been said about the frequent fuel scarcity in Nigeria. This column has maintained consistently that the only solution to fuel scarcity is to have refineries and have fuel products produced locally. The cause of the fuel scarcity is systemic dysfunction arising from years of mismanagement of the oil sector.

Not until there are functional refineries that would put a stop to fuel importation, fuel scarcity will continue to be a recurrent issue irrespective of who is president or which party is in power.

Before now, Nigeria had four refineries owned by the Nigerian National Petroleum Corporation (NNPC), located in Port Harcourt, Warri and Kaduna. The two refineries in Port Harcourt built in 1965 and 1989 were merged into one in 1993, with a total refining capacity of 10.500 million metric tonnes per year. The Warri refinery was built in 1978 with a refining capacity of 5.5 million mt/yr.

The Kaduna refinery was built in 1980 with a refining capacity of 5.5 million mt/yr. The three refineries have a combined refining capacity of 445,000 barrels per day, which amounts to 70.75 million litres of petrol. The Dangote refinery is bigger than all the refineries in Nigeria put together.

The daily demand of petrol in Nigeria is about 40.32 million litres, meaning we ought to have in excess 30.43 million litres. That means, if the three refineries in Nigeria were producing to full capacity, there would be more than enough petrol and an excess of 30.43 million litres that could be exported to earn foreign revenue.

Unfortunately, the refineries are producing far below their installed capacity to the extent that they are not even meeting the meagre 40.32 million litres needed daily in Nigeria.

Following years of low performance and high Turnaround Maintenance cost (TAM), the Federal Government decided to hands off the building and running of refineries and to allow private investors to take over.

Under the Jonathan administration, government offered an equity share of 51 per cent to the oil industry unions to assuage them on the existing refineries. As it were, private investors are the only ones that could redeem Nigeria. Operators of modular refineries are equally welcome.

With the Dangote Lekki Refinery on stream, Nigerians would certainly heave a sigh of relief. The drudgery people suffered on fuel queues would be a thing of the past. This is the first time Nigeria is having a modern petrochemical plant that could rank with those in other countries.