(Reuters) Nigeria commissioned Dangote Refinery on amid hopes of transforming the country into a net exporter of petroleum products, but analysts said securing crude supplies could affect it achieving full production this year.
Africa’s richest man launches $20 billion refinery to revive Nigeria’s oil industry
Worth $20 billion the giant refinery built by the Dangote Group, which is owned by Africa’s richest man Aliko Dangote, aims to produce up to 53 million liters of gasoline per day, as well as 4 million liters of diesel and 2 million liters of aviation jet fuel daily.
President Buhari sees the refinery as the answer to Nigeria's repeated fuel shortages, the latest of which hit the country in the run up to February's disputed presidential election.
Nigeria spent $23.3 billion last year on petroleum product imports and consumes around 33 million liters of petrol a day. Dangote's 650,000 barrels per day refinery plans to produce 53 million liters a day.
The plant plans to export the surplus petrol, turning Africa's biggest oil producer into an export hub for petroleum products. It also plans to export diesel, according to Dangote.
The massive petrochemical complex is one of Nigeria's single largest investments. The refinery cost $19 billion to build after years of delay - above initial estimates of between $12 billion and $14 billion - and has outstanding debt of around $2.75 billion, according to Nigeria's central bank governor.
The complex also has a 435 megawatt power station, deep seaport and fertiliser unit.
Speaking at the commission ceremony, Dangote said the priority was to ramp up production to ensure the refinery could fully satisfy Nigerian demand and eliminate "the tragedy of import dependency."
“We have built a refinery with a capacity to process 650,000 barrels per day in a single train — which is the largest in the world … We decided on a plant designed with state-of-the-art technology and a scale in a capacity that will be a game-changer in Africa and the global market,” Dangote added.
The ceremony attended by Buhari and four other presidents from the region.
CRUDE SUPPLY ISSUES
Dangote expects to begin refining crude in June but London-based research consultancy Energy Aspects said commissioning was an intricate process and expects operations to start later this year, reaching 50-70% next year, with a staggered process of other units into 2025.
The refinery needs a constant supply of crude but Nigeria's oil production has been declining due to oil theft, vandalism of pipelines and underinvestment. In April, production fell under 1 million bpd, below Angola's output.
Lower production would affect state-owned oil company NNPC Ltd's ability to fulfil an agreement to supply Dangote refinery with 300,000 bpd of crude, said economist Kelvin Emmanuel, who authored a report on oil theft last year.
NNPC, with a 20% stake in the refinery, has production sharing agreements with oil majors like ExxonMobil, Shell and Eni and is entitled to a portion of the crude, which it also swaps with traders for petrol and diesel.
The refinery has not signed an agreement to buy from oil majors in Nigeria.
That could see Dangote importing crude from traders like Trafigura and Vitol, Emmanuel said, at a time local refining was expected to save foreign exchange and keep prices lower.
Energy Aspects, however, said in the long run, the Dangote refinery could end Nigeria's gasoline deficit, reshape the Atlantic basin gasoline market and export diesel that meets European Union specifications.
