The 650,000 barrel-per-day refinery, once
complete, will be the continent’s largest plant and redraw major trade flows of
crude and fuel in the Atlantic basin.
The refinery has been delayed by several years
and the cost has ballooned to $19 billion from Dangote’s earlier estimates of
$12-14 billion.
Construction was also delayed due to COVID-19
outbreaks among workers at the site and delays getting materials, two sources
with knowledge of the project said.
Many industry sources do not expect any
products before the second half of next year.
Hit by economic consequences of the COVID-19
pandemic and soaring construction costs, Dangote needs a cash injection.
Nigeria’s state oil firm NNPC has agreed to
buy a 20% stake in the refinery for about $2.8 billion but Dangote is looking
for outside cash.
NNPC’s head Mele Kyari said a process was
on-going to raise $1 billion with Afreximbank to fund part of its stake purchase.
The billionaire has held talks as recently as
a month ago with executives from the world’s top two oil traders – Trafigura
and Vitol.
Trafigura and Vitol declined to comment. A
spokesperson for the Dangote Group did not respond to multiple requests for
comment.
Two sources with direct knowledge said the
option of raising another $500 million from a trade house or consortium was
being actively explored.
The details of a potential loan from a trading
firm have not been finalised but the trader could receive a long-term contract
to supply crude and receive cargoes of refined products as repayment.
Swiss traders like Vitol along with Nigerian
firms, have cashed-in for years in gasoline-short Nigeria by supplying mega
tenders and being part of lucrative crude-for-fuel swap deals for over a
decade.
Getting a hold of Dangote’s fuel will give the
trader a stranglehold on a key set of new oil flows. Nigeria’s new oil bill,
approved last month after nearly 20 years of political wrangling, has added
fuel-import licence requirements that experts fear will give Dangote an
effective monopoly.
Under the new laws, the regulator will
prioritize local refiners for import licences and volumes would be based on
production capacity or market share.
While Nigeria will remain open in theory to
international trading houses, a partnership with Dangote would be the only way
to guarantee a foothold in Africa’s biggest economy
Despite being Africa’s biggest oil producer
and exporter, Nigeria depends almost entirely on fuel imports after allowing
its significant refining capacity, 445,000 barrels-per-day, to become
dilapidated over several decades.
Many past and current Nigerian officials,
including President Muhammadu Buhari, have announced plans to refurbish them
but political will has been lacking.
The Natural Resources Governance Institute, a
non-profit policy think tank, has previously pointed to the moribund refineries
as a key focus of oil corruption and waste in the country.
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