IMF, OPEC, GlobalData Target Dangote Refinery

Chineme Okafor in Abuja

The International Monetary Fund (IMF), the Organisation of Petroleum Exporting Countries (OPEC), and world data and analytics group, GlobalData, are hopeful that the new refinery being built by Dangote Oil Refining Company (DORC) Limited will boost future capacity of global crude oil refining.

The company is constructing an integrated 650,000 barrels per day single-train crude oil refinery in the Lekki Free Zone in Lagos.

While, OPEC in the current edition of its World Oil Outlook (WOO), expects the Dangote refinery to drive world crude oil refining capacity increase in Africa by 2020, GlobalData says with about 158 mega refineries, including Dangote’s coming on stream, global investments in crude oil refining facilities will rise exponentially.

In addition, the Dangote refinery, after coming on stream, will improve Nigeria’s trade balance by $9.9 billion per year.

In a report tagged: ‘Global Planned Refining Industry Outlook to 2023.’ GlobalData said total global planned and announced refining capacity between now and 2023 would be 17,882,000 barrels per day (kbpd).

Under the projection, China leads other parts of the world with 15,994 kbpd in 2018 from its emerging 10 new refineries, put at the cost of $53.2 billion. In Africa, the Dangote refinery in Lekki, put at $12 billion capital expenditure (capex), will raise the oil and gas productivity rating of the continent, making it the second largest country in the world in terms of capacity additions.

This is because by 2023, Nigeria will add about 2,225 kbpd of refining capacity.

GlobalData, in the report, said: “Between 2019 and 2023, 158 new refineries worldwide are scheduled to start operations. Total new-build capital expenditure (capex) of around $520 billion is expected to be spent globally on planned and announced refineries.”

Similarly, IMF said in Nigeria’s Country Report titled: “2019 Article IV Consultation” that the Dangote refinery could transform the country’s petroleum industry, boost growth, turn the country into exporter of refined products, improve balance of payments and transform regional trade patterns.

The IMF said: “With a crude oil production of almost two million barrels per day, Nigeria is Africa’s biggest oil producer and one of the largest oil exporters globally. Yet, only a small fraction of Nigeria’s crude oil production is refined domestically —on average only about 0.08 mbpd have been delivered to local refineries between 2008 and 2017, just a fraction of the theoretical refining capacity of 0.445 mbpd (broadly covering domestic demand) including due to under-investment in the refinery.

“This leaves a substantial opportunity for value added to meet domestic demand for petrol, kerosene, jet fuel, and diesel, and thus to reduce the import bill while diversifying exports. A new oil refinery constructed by the Dangote Group in Lagos State promises to double Nigeria’s refining capacity and boost activities in the downstream sector.”

On its part, OPEC said the world was expecting some capacity expansion coming from Nigeria by 2020, either through the rehabilitation of existing refineries – in part to raise their utilisation rates, or through grassroots projects, like the Dangote refinery.

OPEC stated: “Last year’s World Oil Outlook hinted that, in Africa, “new projects could improve the situation somewhat toward the end of the period. “This year, increasing confidence that the Dangote project in Nigeria will go ahead is indeed changing the picture.

“Allowing for some uncertainty in the project’s start-up timetable, incremental potential in Africa is expected to continue to lag behind incremental demand-based requirements through 2020, after which the potential is for a balance or excess requirements.

“A deficit of around 0.2 million barrels per day (mb/d) in 2019 to 2020 is estimated to swing to an excess of around 0.3 mb/d by 2022 to 2023. It must be borne in mind that this regional outlook is unusual in that it hinges largely on a single project.”

OPEC said the completion of the project would reduce the importation of petroleum products in West Africa. “Since the project is in West Africa, its implementation does not necessarily alter the situations in North and East/South Africa. What should happen, especially in West Africa, is a reduction in the need and opportunity for product imports,” it added.

According to OPEC, in Africa, there are some 50 listed refining projects, which, if all built, would add nearly 5mb/d of new refining capacity to the continent.

“This change relates primarily to one project in Nigeria now under construction. Recognising that this one major project is in West Africa, the prospects for North and East/South Africa continues to be for further increases in regional net product imports.

“It must be borne in mind that this regional outlook is unusual in that it hinges largely on a single project. Moreover, since the project is in West Africa, its implementation does not necessarily alter the situations in North and East/South Africa. What should happen, especially in West Africa, is a reduction in the need and opportunity for product imports,” it stated.

Reacting to the OPEC position, Group Executive Director, Strategy, Portfolio Development and Capital Projects, Dangote Industries Limited, Mr. Devakumar Edwin, said the organisation was correct in its estimation and in ensuring the timely completion of the refinery.

He stated that the Dangote Group’s ongoing refining and petrochemicals project could meet 100 percent of Nigeria’s domestic requirement of all liquid petroleum products (gasoline, diesel, kerosene and aviation jet), leaving the surplus for export in line with the OPEC expectation.

He said that the high volume of petrol output from the refinery would transform Nigeria from a petrol import-dependent country to an exporter of refined petroleum products.

Edwin added that Dangote is also constructing the largest fertilizer plant in West Africa with capacity to produce 3.0 million tonnes of urea per year as part of the gigantic economic transformation project.

He explained that the Dangote fertiliser complex consists of ammonia and urea plants with associated facilities and infrastructure.