Making The Inconceivable Doable

Even the federal authorities itself didn’t effuse much optimism on wholly personal refineries; reasonably, it signed, between 2011 and 2012, its own varied deals worth between N51.Eight billion and N8.1 trillion with native and worldwide investors to assemble 10 new refineries across the nation. However then, admitted the Minister of Petroleum Assets, Diezani Allison-Madueke at the 2013 Oil & Gasoline Offshore Technology Convention and Exhibition in Houston, USA: “Government has not been ready to achieve much progress, as investors have not been in a position to fulfill deadlines and progress to the next degree of negotiation. No investor would want to spend money on a regulated environment./p>

One investor is taking over the gauntlet. To Alhaji Aliko Dangote, President/Chief Executive Officer of the Dangote Group, “Nothing Is Impossible as the plaque on the table ear in his sanely-appointed office in Ikoyi, Lagos State enthuses.

Two weeks ago, on September four, Dangote as soon as again accorded that inspirational philosophy his can-do signature when he inked a $3.30 million (about N528 billion) mortgage facility with a consortium of Nigerian and South African banks to underline his commitment to build a multi-faceted refinery in Nigeria. Undertaking the transaction are Normal Chartered Nigeria, Guarantee Belief Financial institution, Fidelity Bank, Ecobank Nigeria, Zenith Financial institution, United Bank for Africa, Access Financial institution, Customary Financial institution of South Africa, Diamond Bank, First Bank, First Metropolis Monument Financial institution and First Rand of South Africa. Western Normal Chartered shall be coordinating the facility globally, whereas Assure Belief Financial institution is the home coordinator. The Central Financial institution of Nigeria (CBN) can be throwing into the challenge a N50 billion loan contribution with a 7 per cent curiosity rate to be repaid over 15 years.

The new Dangote initiative is an bold three-part greenfield mission incorporating a petroleum refinery, and petrochemical and fertiliser plants. The whole cost of the three tasks is put at $9 billion. Oil and gasoline contractor, Saipem, a subsidiary of Italy’s Eni, is already working on the fertiliser plant situated in Edo State. The petrochemical and petroleum refineries plants are being situated at Olokola Free Trade Zone (Ok-LNG FTZ) bordering Ogun and Ondo states. Dangote knowledgeable that the mission could be the largest industrial complicated ever in Nigeria.

The Dangote Group has awarded contract for the refinery and petrochemical plants to UOP, a subsidiary of Honeywell Worldwide, a Fortune 500 company and United States-based mostly conglomerate that specialises in consumer products, engineering services and aerospace methods. The venture supervisor is India Engineers Limited, an Indian government-owned company credited with the setting up of refineries in India.

The fertiliser plant is designed with a capability to supply 2.75 million metric tones per annum (mtpa) of ammonia and urea. But it’s within the refineries that Dangote is surpassing himself. Designed as the most important in Africa, the petroleum refinery may have an general manufacturing capacity of four hundred,000 barrels per day (bpd), while the petrochemical plant’s production capacity for polypropylene is 600,000mtpa. Slated to be completed in 2016, the petroleum refinery is expected to provide 7.684mtpa of petrol, 5.30mtpa of diesel, 3.740mtpa of jet gasoline/kerosene, zero.213mtpa of liquefied petroleum (cooking) fuel and zero.625mtpa of slurry/fuel oil.

The plants are being established to conform with the environmental necessities of Euro 5 quality commonplace, as in contrast with the Euro 3 currently supplied in the Nigerian market. The Euro 5 and 6 standards are the contemporary recommendations for engineering and technological products spewing fuel emissions with a view to maximally eliminating those emissions and attaining environmental purity.

The Dangote initiative promises to end the various futile efforts at establishing functional personal refineries in Nigeria, and more important, stem and even cease fully importation of petroleum products (ipp). Nigeria grew to become consigned to perpetual ipp from the nineteen nineties when production capacity step by step began to decline and import substituted export. Up till 1991 and 1992, Nigeria still earned $124 million and $156 million respectively from exporting petroleum products refined at its three refineries in Port Harcourt, Warri and Kaduna, which have a combined production capacity of 445,000 barrels per day.

But the story has since modified, with Nigeria’s refineries presently performing the poorest among the forty two in Africa. The country’s mixed production capability should have been the third largest on the continent, topped only by Egypt’s 9 refineries with a combined manufacturing capacity of 774,900bpd (85 per cent of installed capacity) and South Africa’s two refineries of 545,000bpd (81 per cent). A report by the Petroleum Refineries Particular Job Drive constituted last yr by the federal authorities and headed by former Minister of Finance, Dr Kalu Idika Kalu, put Nigeria’s common capacity utilization by final yr at a sorry 18 per cent.

In 1995, the administration of then Head of State, Normal Sani Abacha moved to address the degenerating situation when it granted Brass Refinery Limited, Okpoma, Bayelsa, the primary licence to construct and function a personal refinery. But, because the refinery’s Mission Supervisor, Mr. Joel Dappa, told Sunday Belief in January final year, the undertaking failed because the circumstances authorities gave for the institution of non-public refineries were too regulated. Furthermore, and extra instructive, there was a cabal, Dappa alleged, benefiting from refined imported petroleum products who wouldn’t permit the native refineries in the nation to work.

Since then, government has been issuing a rash of licences to private traders to build and/or operate refineries – with no exceptional results. The Idika Kalu committee recognized a complete of 35 corporations, both these already granted licences (licencees) and licence applicants across the three categories of refinery operation. The classes are Licence to establish (LTE), Authority to Assemble (ATC) and Licence to Function (LTO). Of all of the 35 firms that the committee invited to appear before it to make clear their state of affairs studies, solely 21 turned up. The committee could not even acquire data, together with contact addresses, from the Directorate of Petroleum Resources (DPR), the supervising body for private refinery projects, on three licencees that failed to seem.

Even for those that confirmed up to defend their licences, the committee found it was all paper and no refinery. Only three plants passed as useful in each of the three categories, but, in fact without the capability to influence on the nation’s consumption necessities.

Beneath LTO, the Niger Delta Petroleum Assets (NDPR), a marginal subject oil producer, is the one non-public firm the committee deemed as possessing a legitimate licence. The corporate then only recently commissioned a 1,000bpd refinery, producing solely diesel at Ogbelle, Rivers State. The refinery feeds from NDPR’s crude oil manufacturing and the bottoms are injected back into its crude oil line. This the committee considered as an illustrious example of a profitable value-chain associated refinery improvement.

But it was one illustration that was suggested shouldn’t encouraged, because of the bottoms suggestions. “If such diesel refineries are quickly replicated in lots of places the committee warned, “the consequence will probably be a big downgrading of the aggregate crude oil high quality, with potential consequences on crude oil export and /or local refinery feedstock./p>

The Amakpe Refinery, proposed to be sited at Eket in Akwa-Ibom State, had a sound ATC licence it had been granted since 2007. However there had been no real progress on the challenge on account of funding constraints. Eleven different ATC licences had expired or been cancelled and the owners unable to revalidate them.

Five companies had expired LTE. However two firms, the Kainji Refinery and Omega-Butler, were by 2011, pursuing their LTE approvals. All licencees, the committee pointed out, had been bedevilled by funding constraint, lack of technical depth and operational functionality, and failure to acquire crude provide agreements.

Another proposed refinery that has been raising a lot manufacturing hope over the past 9 years is Oriental Refineries to be operated by Oriental Petroleum Resource Restricted (OPRL) in Otuocha, Anambra State. OPRL was amongst the first batch of 18 corporations the federal authorities awarded licences in Might 2002 to ascertain petroleum refineries. But the company has since been struggling to beat the funding drawback.

Mid-last year, the Governor of Anambra State, Peter Obi, announced his administration had spent N4 billion on the refinery and it would be commissioned before the year ran out. But it surely was one other commissioning dream dashed. OPRL chairman, Dr. Emeka Anyaoku has, however, given a new date. Anyaoku mentioned Oriental Refinery would commence manufacturing by the tip of this year with an preliminary production capacity of 20,000bpd.

As in Anambra State, Imo State indigenes have additionally been waiting for the Royal Oak Refinery, Abacheke, proposed by the Imo State Authorities in partnership with the Royal Oak Group of the United States of America. In 2009, Ben Ekwueme, the Special Adviser to the then Governor of Imo State on Challenge Monitoring, assured that the refinery can be accomplished in 2002 and would begin manufacturing immediately. Sunday Trust’s inquiry last Friday to the Imo State Liaison Officer in Abuja on the extent of labor on the refinery and when manufacturing would begin there couldn’t be instantly answered by the lady official.

It is in opposition to the background of those “impossibilitiesthat Dangote is saying his intervention with his proposed refinery. He described the venture “the single largest particular person funding because the graduation of the democratic government in Nigeria.In contrast to these abandoned petroleum refinery projects, business analysts are not entertaining any concern of fund constraint, the major nemesis against establishing non-public refineries, within the Dangote Refinery.

The Dangote Group is a giant toast with native and international banks in loan-financing. In 2003, the Group syndicated N60 billion a number of credit score facilities from a consortium of 14 banks to restructure current Dangote Industries Restricted quick-time period facilities into medium-term and finance the development of Obajana Cement, Kogi State.

And in 2010, whereas the development of the Ibeshe, Ogun State cement plant was ongoing, Alhaji Dangote gathered 10 banks at the site to liquidate, in a single fell swoop, a $1.27 billion loan facility he had obtained on behalf of his organisation from the financial consortium in Might 2008 to finance its cement division’s expansion.

He was liquidating the loans five years ahead of schedule. The banks concerned in the loan syndication have been Entry Bank, Afribank, Bank PHB, FCMB, Fidelity Bank, First Financial institution, Guaranty Belief Bank, Stanbic IBTC, United Bank for Africa, and Zenith Bank.

The $3.5 billion facility secured two weeks in the past is the primary tranche. The banks are waiting to avail the Dangote refinery project a second call.

This latest Dangote initiative will additional jack up the Group’s over-all market profile, which has within the final five years elevated 10-fold to a market capitalisation of $22 billion. The Dangote Group presently accounts for over 30 per cent of the whole market capitalisation of the Nigerian Inventory Alternate (NSE).

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