Dangote’s Refinery to Begin Operations in October

The long-awaited 650,000 barrels per day Dangote refinery would receive its first cargo of crude in the next two weeks and would begin producing up to 370,000 bpd of diesel and jet fuel from October, the company’s management has said.

In an interview with S&P Global Commodity Insights, the company’s Group Executive Director, Devakumar Edwin, who is overseeing the $19.5 billion facility, outlined a detailed production timeline, shed light on crude and product flows and laid out a litany of complications and delays to the project since it was first mooted in 2013.

“Right now I’m ready to receive crude,” said Edwin, who previously ran Dangote Cement. “We are just waiting for the first vessel. And so as soon as it comes in we can start,” he added.

Dangote aims to make Nigeria, Africa’s biggest producer which imports all its refined products self-sufficient in fuels and leave plenty more for export.

Edwin, said the refinery, which was officially inaugurated by former President, Muhammadu Buhari in May, would launch in phases, beginning with 350,000-370,000 bpd of diesel and jet fuel by October, when the crude distillation unit, sulphur block and hydrogen plant should be online.

Then on November 30, he said the refinery would start the phased ramp-up to 650,000 bpd, around half of it petrol production, the key area of Nigerian fuel demand.

S&P Global analysts predicted that the refinery would not hit full operating capacity until mid-2025, according to a recent note, with further delays still possible. Still, forecasts from S&P Global suggested that Nigerian petrol production would exceed imports until the 2040s as a result of the refinery.

Although the refinery was designed to process light sweet Nigerian crude, state-owned Nigerian National Petroleum Company Limited (NNPC), which is a shareholder in the project, cannot supply the refinery until November, Edwin said. So, Dangote would be buying oil from trading houses. Vitol and Trafigura recently carried out inspections of the plant, he said.

“At the last minute (NNPC) said, ‘We have actually committed our crude on forward basis to someone else’, so immediately they don’t have the crude,” he said. This is a temporary issue, and the refinery should run on exclusively Nigerian crude by November, he stressed.

That Nigerian oil would be purchased in US dollars, not naira as some reports had suggested, because it is located in a free zone on the outskirts of Lagos, Edwin said. However, NNPC would supply some crude at knockdown prices due to its equity stake.

Edwin said the scale of the refinery meant being, “solely dependent on Nigerian crude would not be advisable,” meaning the refinery could process most African crudes apart from heavy Angolan grades as well as Middle Eastern Arab Light and even US light tight oil.

“We can take even some of the Russian grades… if the global system opens up to allow us to receive (them),” he said.

The refinery, he said, was not only targeting the Nigerian market with its refined products.

“Basically if you look at our production profile, 50 per cent of my production will meet 100 per cent of the requirement of the country,” Edwin said.

Excess petrol – which would be 10 ppm sulphur Euro 5 quality would be exported to other African markets as well as the US and South America, although the volumes will be relatively small, he said.

Meanwhile, jet fuel would be exported to Europe and diesel will be sold in sub-Saharan Africa.

In Q1, 2023, Nigeria imported 383,400 bpd of gasoline and diesel, according to data from S&P Global Commodities at Sea. Imports fell to 193,000 bpd in Q2 after the subsidy removal.

Edwin said refined products can be evacuated from the refinery by road or by sea, with the two routes able to handle 80 per cent and 75 per cent of production respectively.

Wary of theft and vandalism of pipelines in Nigeria in recent years, which is claiming 400,000 bpd of crude according to NNPC, Dangote’s only pipelines connect the refinery to single buoy moorings in its purpose-built port, which Edwin said could handle VLCCs and even ULCCs (very large and ultra large vessels).

“I can load a Suexmax in a day, I can offload a VLCC in a day,” he said.

The company is also widening the road connecting the refinery to the expressway. That job is 70 per cent complete, Edwin said.

Although discussions started as far back as 2013, Edwin said Dangote only began physical construction five years ago following a string of delays and mishaps. The first plot of land in a free zone in Ogun state was ditched following potentially “disastrous” political interference, he said.

After buying 33 square km of land in Lagos state for $100 million, the team found more than 70 per cent of the plot was swamp and spent a year clearing it. Then, faced with the possibility of rising sea water claiming the land in the next 70 years, Dangote spent $50 million elevating the land by 1.5 meters.

“We had to hire the world’s largest dredger, second largest dredger, and third largest dredger to… pump in about 65 million cubic meters of sand,” he said.

The company also had to construct a port capable of receiving extremely heavy assembled equipment because it lacked the infrastructure to assemble equipment in Nigeria, import 200,000 pikes to prevent sinking, buy 320 cranes and invest in a 10 million tons per year granite quarry.

Ultimately, delays proved a blessing, Edwin said, because, “we had time to increase the capacity of the refinery (and) improve efficiencies in the design.” What will be the world’s largest single-train refinery began life as a 300,000 bpd project, Edwin added.

Edwin, who joined Dangote Group in 1992, said the refinery would be “enormously beneficial to the country” by establishing a reliable supply of “environmentally-friendly” refined products and bringing “a huge amount of foreign exchange into the country.”

It will also ease a fuel supply crisis in import-dependent West Africa, where Nigeria’s recently-scrapped fuel subsidy created a thriving illicit market for gasoline amid price fluctuations, the report noted.