The Federal Executive Council (FEC), at its most recent meeting, approved the proposal by the Nigerian National Petroleum Corporation (NNPC), to acquire a 20 per cent stake in the soon to roll out Dangote refinery- an integrated energy project- for a cash consideration of $2.76 billion.
This is sequel to NNPC’s plans to invest in some upcoming private refineries in the country. According to the oil conglomerate, the decision is in line with the corporation’s commitment to guarantee national energy security.
We recall that NNPC had, earlier in May 2021, announced its intention to acquire an equity stake in Aliko Dangote’s refinery, as well as in five other refineries that are in the development phase, to promote “national energy security”. Already, Nigeria has four refineries – located in Port Harcourt, Kaduna, and Warri- with a combined installed capacity of 445,000 barrels per day compared to Dangote Petroleum Refinery project with a capacity of 650,000 barrels per day.
Justifying this commendable investment in a private sector driven project, the Group Managing Director of the NNPC, Mallam Mele Kyari, said that there is no resource-dependent country that will watch a business of this scale, which borders on energy security and has implications for fiscal security of the country, and not show interest. As an objective, it is designed to grow the domestic refining capacity and improve petroleum products supply from local refineries.
He further explained that the proposal is in conformity with a government directive stipulating the mandatory participation of the corporation in any privately owned refinery that exceeds 50,000 barrels per day capacity.
The Dangote refinery has the largest single train petroleum refinery in the World with the capacity to produce enough to meet Nigeria’s petrol needs and for export. It can meet 100 per cent of the Nigerian requirement of all refined products which include 57 million litres of petrol per day, 27 million litres per day of diesel, Kerosene, 11 million litres per day and Aviation Jet, nine million litres per day and also have surplus of each of these products for export.
We consider as plausible NNPC’s argument that the planned investment in the private refineries will guarantee regular supply of crude oil to the refineries on completion and by extension, a satisfactory supply of refined products for local consumption.
Also, we applaud this effort at building synergy between the corporation and the private sector players like Dangote which will hopefully, reduce the foreign component of imported finished petroleum products and in turn rub off positively on the pump price of the products. However, it is pertinent to point out that crude oil is an international product, sold in foreign currencies and the refinery on completion, is at liberty to source additional crude oil elsewhere based on terms and conditions favourable to it. Without doubt, this will make refined products available but also at prices that are market driven and guarantee return on investment.
Reacting to this development, industry watchers agreed with NNPC that this is a good investment move influenced by strategic thinking. An analyst, Bismarck Rewane, is optimistic that the investment in Dangote Refinery will be beneficial in the sense that through it NNPC and, by extension, Nigerians will be guaranteed the supply of refined products. Even more importantly, he said, the deal will ensure that the conglomerate’s share of the joint venture crude from its dealings with international oil companies (IOCs) will now have a ready market.
For the Dangote group, and in the opinion of this newspaper, this deal with NNPC is a bold business move that ought to be commended. Similarly, it is a demonstration of the level of confidence each party has in the other.
As a private sector initiative, it took immense courage on the part of Dangote to accept to build synergy with a public sector corporation like NNPC in an environment like Nigeria’s that is prone to meddlesomeness and policy inconsistency.
We are also enamoured by the fact that he has similar understanding with other oil companies outside the shores of Nigeria. What this indicates is that Dangote is determined to sustain the running of the refinery with inputs from experienced corporations that have been in the field for a longer time with ideas to bring on board that will ensure that the refinery operates seamlessly on the basis of international best practices. It is also to be appreciated that by accepting to diversify its investment, Dangote refinery is committed to spread the risks thus making them manageable.
We are also persuaded to accept that the two parties must have factored in the provisions of the Petroleum Industry Bill (PIB) just passed by the National Assembly in the Memorandum of Association as well as the Memorandum of Understanding which will finally ratify the relationship. It is imperative that the rules of engagement are based strictly on terms and conditions that conduce to private sector operating standards elsewhere.
It is the expectation of this newspaper that, eventually, the result of this engagement between NNPC and any private refinery, Dangote in this instance, will be such that presents optimum benefits to all the stakeholders especially the consumers of petroleum products in Nigeria.