Maintenance

Dangote Refinery: "There should be no more gasoline supply problems in Nigeria"

General view of the newly commissioned Dangote oil refinery in Ibeju-Lekki, Lagos, Nigeria, May 22, 2023. REUTERS - TEMILADE ADELAJA

Text by: Charlotte Cosset Follow

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On May 22, 2023, President Muhammadu Buhari inaugurated the large refinery built by billionaire Aliko Dangote in Nigeria. A political inauguration a week before the transfer of power to President Ahmed Bola Tinubu. The project, valued at nearly $20 billion, will cover more than 2,500 hectares in the Lekki Free Zone. In particular, it must make it possible to supply the country's petrol stations. Benjamin Auger, a researcher at Ifri, a specialist in energy issues and Nigeria, deciphers the issues surrounding this infrastructure.

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RFI: Benjamin Auger, what will be the production capacity of this refinery built by billionaire Aliko Dangote?

Benjamin Auger: The production capacity of this refinery of 650,000 barrels per day is equivalent to about two and a half times the consumption of Nigeria. Nigeria consumes about 200,000 barrels per day of gasoline. So normally from the moment the refinery is able to process Nigerian crude, there should be no supply problem in Nigeria. Currently, the situation is complicated because almost all petroleum products in Nigeria are imported.

Yet Nigeria already has refineries. How could Aliko Dangote's infrastructure make a difference?

You have four refineries in Nigeria, but they are operating extremely poorly, particularly in the producing region of the Niger Delta. They are not functioning well while their installed capacity, i.e. their capacity to process gasoline, is 445,000 barrels per day, twice as much as Nigeria's consumption. Because quite simply, we built refineries that we did not maintain. As a result, their capacity has skyrocketed.

And, in fact, the reason why we did not put enough money into their maintenance is that a huge lobby of gasoline import traders gradually formed, became extremely powerful and prevented them from maintaining these refineries because it posed a problem for their business directly. Why could this Dangote refinery make a difference? Because Dangote's political ability to influence political decisions in Abuja is such that – whoever the president, whether it is the current Buhari or the one who arrives in a week, Ahmed Bola Tinubu – he will certainly be able to largely destroy the ability of these Nigerian traders to influence. So that's why this project is moving forward, while the project for refineries and maintenance of existing refineries has never been able to work.

Nigerian President Muhammadu Buhari speaks during the commissioning of the Dangote Petroleum refinery in Ibeju-Lekki, Lagos, Nigeria on May 22, 2023. REUTERS - TEMILADE ADELAJA

So it will be more to do with Aliko Dangote's personality?

Yes, as it has already done for cement and other products, to impose itself as a kind of monopoly on a product, in this case gasoline, and also to have an export capacity. Because production at full capacity is 650,000 barrels per day, it gives the capacity to supply all of West Africa.

Nigeria is one of the largest oil producers on the continent. However, its production is declining and the economic benefits are not up to expectations. How can this be explained?

There are several reasons for this. One is legal, that is to say that for more than ten years, you have an oil law that has been under discussion in the Assembly and the Senate. It was finally voted in 2021. And during that whole decade, there was almost no investment, there was even the departure of traditional majors in Nigeria like Total and Shell or Chevron and Exxon, who sold a number of their permits. And you also have another dynamic, which is the security issue in the producing region of the Niger Delta: 2022 and 2023 were record years in terms of flight.

By the end of 2022, it was estimated that about 450,000 barrels per day were being stolen in Nigeria. This is equivalent to the production of Gabon and Congo combined. And so, inevitably, revenues fall because legal production is falling and they are unable to reach their OPEC quota as a result. So two reasons: a legal reason that led to the lack of investment and a security/theft reason that led to the decline in volumes produced in Nigeria, therefore a decrease in revenues related to the hydrocarbon industry.

Behold the spectacle that is Dangote Petroleum Refinery and Petrochemicals 📌 #WeAreDangote #EnergyForAll #AfricaEmpowered #DangoteRefinery pic.twitter.com/1baUbTenO1

— Dangote Group (@DangoteGroup) May 20, 2023

Nigeria: Lekki refinery inaugurated with great fanfare

It is a titanic project costing nearly $20 billion. In Nigeria, billionaire businessman Ali Dangote's giga-refinery was inaugurated on May 22, 2023 in Lekki, on the outskirts of Lagos. The country's outgoing president, Muhammadu Buhari, made the trip.

This inauguration, attended by our correspondent Liza Fabbian, is in a way his farewell gift to Nigeria, a week before leaving power. The inauguration may have been brought forward so that he could put his name on this project.

On the other hand, the president-elect, Bola Tinubu, was not present. He was represented by his vice-president, Kashim Shettima. Other heads of State of the sub-region also made the trip: Macky Sall (Senegal) or Mohamed Bazoum (Niger), proof of the regional importance of this gigantic infrastructure.

Ultimately, the Aliko Dangote refinery is to produce 650,000 barrels of refined products: gasoline, diesel, kerosene. Enough to fully cover Nigeria's fuel needs and even export a surplus.

But many questions remain unanswered. During his speech, Aliko Dangote announced that production from his refinery would be on the market by August, but it is clear that it will not be running at full capacity immediately.

Moreover, even if Dangote now promises to focus on the local market, some connoisseurs of the oil sector interviewed by RFI are worried that it will end up exporting a good part of its production.

Nigeria's national oil company, NNPC, which owns 20% of the refinery's capital, has in any case committed to supplying 300,000 barrels of crude after this inauguration.

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• Nigeria
• Economy Africa
• Petroleum
• Economy
• Muhammadu Buhari