Dangote wary about plans by NNPC to buy a 20% stake in his new Lekki refinery

AFRICA'S richest man Alhaji Aliko Dangote has expressed concern about plans by the Nigerian National Petroleum Corporation (NNPC) to purchase a 20% stake in his newly-opened Lekki refinery.

A  650,000 barrels per day integrated refinery and petrochemical project, the Dangote refinery in the Lekki suburb of Lagos costs $12bn to construct and will meet all of Nigeria's domestic petroleum needs. When fully functional, the Dangote refinery is expected to produce 10.4m tonnes of gasoline, 4.6m tonnes of diesel, 4m tonnes of jet fuel, 690,000 tonnes of polypropylene, 240,000 tonnes of propane, 32,000 tonnes of sulphur and 500,000 tonnes of carbon black feed a year.

Nigeria's state-owned oil conglomerate the NNPC has expressed an interest in purchasing a 20% stake in the venture despite the fact that it owns three refineries of its own. Mustapha Yakubu, the NNPC's chief operating officer refining and petrochemicals, said that the collaboration will further ensure undisrupted product supply to Nigerians when the deal materialises.

However, the NNPC's managing director Melee Kyari, said Alhaji Dangote does not want to sell shares in his refinery and petrochemical project. He added, however, said it is important that the NNPC, as the national oil company, guarantees energy security for the country by having a say in the board of the refinery.

Last year, a total of N81.41bn was expended on the NNPC refineries between January and August even though the facilities never refined a drop of crude oil all through the period. Several billions of dollars have also been spent by many governments to revive and rehabilitate the nation’s refineries but no success has been recorded in a very long time.

Nigeria's consuming public continues to bear the brunt of the government’s inability to make its refineries functional. Today, petrol sells for between N163 and N165 per litre in the country, with the NNPC mulling an increment, saying the current pump price is short of petrol landing cost which it said is around N232 per litre.

Many private entities have since identified the opportunity in the energy sector and came up with modular refineries which have the capacity to produce some thousands of litres of petroleum products but their output is far short of the daily petroleum consumption of Nigeria, with over 200m people.  One of the big entrants into the energy sector is business magnate Alhaji Dangote, whose refinery, which is projected to start production next year, is expected to fill in the gap for imported petroleum products.

Mr Kyari said: “Dangote refinery will come to work, by 2022, it should come into production and what that should do is to deliver over 50m litres of gasoline, to be specific, into our market. We are also working on our refineries to make sure we fix them and we have awarded the Port Harcourt refinery rehabilitation and ultimately, we are close to that of Warri and Kaduna, so that very soon, in July, all of them will work contemporaneously and at the end of the day, we will deliver all of them."

“The net effect is that you are going to have an environment where Nigeria becomes a hub for petroleum supply. It is going to change the dynamics of petroleum supply, even globally, in the sense that the flow is coming from Europe today and it is going to be reversed to some other direction. We will be the supplier for West Africa legitimately and also many other parts of the world.

“The meaning of this is that there is an opportunity thrown at us and I am not sure that Mr Dangote wants to sell his equity in the refinery. I can confirm that it was at our instance that we started the engagement but he did not want to sell his shares in this refinery.

“There is no country that would watch a business of this scale, which is bordering on energy security, which also has high implication even on the physical security of our country and you watch it that you don’t have a say.

“I am not sure Mr Dangote is very happy with this but we are taking 20 per cent equity of the Dangote Refinery. There is a valuation process, it is very international and very regulated and no bank will give you money to buy stake.”

He further added that the NNPC is seeking the authority of the Federal Executive Council to close the deal which he said is worth about $19bn. Mr Kyari stated that the government is not going to use public money to buy the stake but borrow the cash from banks because they know that this business is viable in the short term.