In a recent development, it was announced that the Dangote oil refinery is set to be commissioned by President Muhammadu Buhari after years of delays and regulatory challenges. Nigeria, Africa’s largest oil producer, sees this as an big opportunity to help wean the country off dependent on imports of nearly all of its refined petroleum products. The Crude Distillation Unit (CDU) of the plant is scheduled to begin commercial operations by the end of June. Nigerians, operators in the business, government officials, and other stakeholders have expressed excitement and anticipation after hearing the facility will officially open on May 22.
Located in Lagos, Nigeria’s Lekki Free Zone, the 650,000bpd integrated refinery project is expected to be completed at a cost of over $19bn. Aside from being the largest single-train facility in the world, it will also be the largest oil refinery in Africa. Based on the Dangote Refinery’s activities, Nigeria will be able to conserve cost and have easier access to more economical petrol and other petroleum products. The refinery will produce enough refined products to supply all of Nigeria’s needs and still have a surplus to market overseas.
The refinery will help Nigeria save billions of naira.
With the completion of the Lekki Refinery, Nigeria’s refining capacity would rise to 3.24 mbpd (barrels per day). Once operational, its single CDU with a capacity of 650,000 BBL/d will be the largest in the world. But as of now, the Yanbu Refinery in Saudi Arabia, with its 430,000-BBL/d CDU, is the largest one in operation. Over US$14 billion in active projects are being tracked by Industrial Info at the Lekki Refinery, which represents less than fifty percent of the total investment in all active refining projects in Nigeria.
It has been corroborated by other operators that the refinery will help Nigeria save billions of naira due to the fact that the country will no longer need to import Premium Motor Spirit (PMS) on account to the plant’s refining capabilities. The Lekki Refinery’s crude unit has been unable to run due to power plant difficulties, delaying the start of commercial operations. While the downstream plants are not scheduled to start up until later in the year, the business now aims to start up the boilers and gas turbines by June. Other units may not start up until late 2024 at the earliest.
NNPC will stop importing refined products into the country.
According to Hillary Stevenson, senior director of Energy Market Intelligence at IIR Energy, all market eyes are on the facility commencement of operation especially as it pertains to how much crude it will process. Findings show that the plant will likely run at 50% capacity until its downstream units are up and running, which may not happen until 2025, he added. After acquiring a 20% share in the Lekki Refinery in 2021, the Nigerian National Petroleum Corporation (NNPC) has announced that it will stop importing refined products into Nigeria by the end of the year.
Mele Kyari, CEO of NNPC, had also in recent times informed reporters that the government will no longer need to import petroleum products solely due to the planned output from Lekki and other state-owned refineries. As soon as the refinery starts up, crude production from NNPC’s partnership with oil companies would be allocated there, according to Kyari. Majority of the refinery’s output will be petrol, with some diesel and jet fuel production as well. The Financial Post reports that for the next 20 years, NNPC has contracted sales of at least 330,000 BBL/d.
N1 bn will be saved daily if logistics costs reduced by N17 per litre.
NNPC keeps Nigeria awash in petroleum at a rate of over 60 million liters per day. If logistics costs could be lowered by N17 per liter, that would save N1.02 billion every day. If this is correct, then once Dangote Refinery starts operating, the country will save about N367 billion each year. The project is one of nearly two dozen indigenous refineries being built around the world to make up for refinery rationalizations caused by the recent pandemic and to keep up with expanding global fuel demand.