After years of delays, Africa’s largest oil refinery has begun processing crude oil. The facility, capable of processing 650,000 barrels per day, was constructed on reclaimed swampland and aims to eliminate Nigeria’s dependence on fuel imports.
Owned by Africa’s richest man, Aliko Dangote, the $20 billion refinery received its first shipment of crude oil in December 2023. Just last week, it welcomed its sixth cargo, enabling the initial production of diesel and aviation fuel.
Akin Omole, managing director of Dangote Ports Operations, stated that the delivery of six million barrels of crude will support the refinery’s initial operations and kick off the production of diesel, aviation fuel, and liquefied petroleum gas. According to Omole, production of premium motor spirit will begin soon after.
“We thank President Bola Tinubu for his support and for making our dream come true. This production, as witnessed today, would not have been possible without his visionary leadership and prompt attention to details,” the Dangote Group said in a statement.
Meeting all of Nigeria’s domestic fuel needs, the refinery can also export surpluses. Its premium gasoline production starts later, reaching full capacity by 2025.
Repeated construction delays pushed back its completion date from 2019 to late 2022. The Covid-19 pandemic and intricate plant infrastructure like a 435 megawatt power station caused holdups.
After starting mechanical operations, the refinery will scale up to its full capacity. Loading 2,900 fuel trucks daily, it is projected to produce 10.4 million metric tons of gasoline and 4.6 million tons of diesel annually.
“This is a big day for Nigeria. We are delighted to have reached this significant milestone. This is an important achievement for our country as it demonstrates our ability to develop and deliver large capital projects. This is a game changer for our country.”
Here are 10 things to know about the project, the biggest oil refinery in Africa.
1. Meeting Nigeria’s needs
The refinery is expected to meet 100% of all refined products required in Nigeria, and have a surplus for export. The refinery will initially produce diesel and aviation fuel and later progress to premium motor spirit.
Though designed to process Nigerian crude, the refinery can also process most other African crude grades as well as Middle Eastern Arab Light and even US Light Tight crudes.
Of the 650,000 barrels crude refined per day when fully operational, 450,000 bpd will be dedicated to meeting Nigeria’s domestic requirement.
2. Scaling up production
Although it’s a 650,000 bpd facility, the refinery will start producing at 370,000 bpd, according to Devakumar Edwin, an executive at the Dangote Group. The company says the refinery can load up to 2,900 trucks a day at its truck-loading gantries.
The refinery is expected to produce 10.4 million tonnes (Mt) of gasoline, 4.6Mt of diesel, and 4Mt of aviation fuel annually.
It will also produce 0.69Mt of polypropylene, 0.24Mt of propane, 32,000t of sulphur, and 0.5Mt of carbon black per year. The products from the refinery will conform to Euro V specifications.
The refinery design complies with the World Bank, US EPA, European emission norms, and DPR emission/effluent norms. Analysts say the refinery will attain full operating capacity by 2025.
3. Repeated delays
The refinery project was first announced in 2013 at an estimated cost of $9bn. By the time major structural construction began in 2017, the cost had ballooned to about $15bn.
That notwithstanding, the Dangote Group estimated the refinery to be “mechanically completed” in late 2019 and commissioned early 2020.The completion date was further moved to late 2020 due to the Covid-19 pandemic, and the commissioning by the end of the first half of 2021.
In June 2021, Devakumar Edwin, the Dangote Group executive director, announced that the refinery would be completed by the end of December that year. “The project has incurred some delays due to the Covid-19 pandemic,” Edwin said at a petroleum summit.
We have locked down the ability to sell crude for 33,000 barrels minimum by right for the next 20 years
“As at date, the project construction has progressed to 79% and an overall project completion of 89.5%, considering engineering, procurement and construction,” he said.“At the current rate of progress, the mechanical completion is now expected to be accomplished by the fourth quarter. Commissioning is expected to commence immediately.”
During a site tour in April 2022, Information Minister Lai Mohammed was told that the refinery would be completed in the fourth quarter of the year. By the time former President Muhammadu Buhari finally commissioned the refinery one year later, the project had gulped nearly $20bn.
4. Funding the refinery
The refinery was built with the contribution of 50% equity investment by Dangote and 50% debt finance by banks.
Nigeria’s domestic banks mostly financed the commercial loan component of the project while the balance was sourced from foreign banks. The Central Bank of Nigeria (CBN) provided N125bn ($130m) to cover domestic currency requirements.
The United States Trade and Development Agency also provided a N250bn training grant for human resource development for the refinery operation.
As of the time of the refinery’s commissioning in May 2023, the total outstanding debt from the project stood at $2.7bn.
5. Foreign exchange earner
Nigeria’s expenditure on the importation of petroleum products tripled over a five-year period, from $8.4bn in 2017 to $23.3bn in 2022, according to the CBN.
The Bank projected that the country could spend up to $30bn annually by 2027 if it continues to rely on petroleum imports.
“Aside from the nearly $30bn foreign exchange savings from the reduction in petroleum imports, the economy is projected to benefit an extra $10bn of foreign exchange inflow through the export of refined petroleum products, which will further boost our foreign exchange reserves and enhance exchange rate stability,” former CBN governor Godwin Emefiele said at the commissioning of the refinery in May 2023.
6. Crude supply
The refinery received its first crude supply of one million barrels from Shell International Trading and Shipping Company Limited (STASCO) in December last year. The cargo from Agbami sailed to Dangote Refinery’s Single Point Mooring where it was discharged into the refinery’s crude oil tanks.
It received five additional one million-barrel cargoes — one more from STASCO and the remaining from the Nigeria National Petroleum Company Limited (NNPCL).
The sixth one million barrels of crude was delivered by NNPCL on 8 January, completing the initially scheduled six million barrels consignment to be delivered to the refinery.
“This latest development will play a pivotal role in alleviating the fuel supply challenges faced by Nigeria as well as the West African countries,” the company said in a statement.
7. Nigerian government’s equity
The Nigerian government through the NNPCL owns a 20% equity in the refinery valued at $2.7bn. The refinery will receive an initial 300,000 barrels of crude oil per day from the government.
In addition to holding the 20% equity in the refinery, the NNPCL has the right of first refusal to supply crude to the plant, Mele Kyari, the corporation’s chief executive officer, said in August 2022.
By right, we [also] have access to 20% of the production from that plant
“But we saw this energy transition challenge coming, we knew that time will come when you will look for people who will buy your crude oil, you will not find,” said Kyari. “And that means we have locked down the ability to sell crude for 33,000 barrels minimum by right for the next 20 years. By right, we [also] have access to 20% of the production from that plant.”
An agreement between the two entities stipulated that the government would pay $1bn in cash, supply crude oil worth $1bn, while the $700m balance would be paid via earned dividends from the refinery’s operations, according to Nigeria’s Vanguard newspaper.
8. Built from scratch
The refinery which sits on 2,635 hectares of swampland – about six times the size of Victoria Island – was from the ground up with barely existing infrastructure.
About 65 million cubic metres of sand was dredged using the world’s largest dredgers and costing approximately €300m ($326m).
For the civil works, a total of 250,000 piles were drilled. The facility has a total of 177 tanks of 4.742 billion litres capacity.
The refinery, powered by a 435 megawatts power plant, also has the largest subsea pipeline infrastructure in the world, with a capacity to handle three billion cubic metres of oil annually.
9. Foreign-trained engineers
At least 900 young engineers were trained in refinery operations abroad — mechanical engineers trained in GE University in Italy and process engineers trained by Honeywell UOP for six months.
Others trained at Bharat Petroleum Corporation, Mumbai in India.
10. Contractors on the project
At least 10 contractors were involved in various aspects of the refinery’s construction from inception to when it started operations.
Engineers India Limited handled the engineering, procurement, and construction while Honeywell UOP, a US company, supplied catalyst regeneration and dryer control systems, high-performance column trays, heat exchanger tubes, modular CCR unit, catalyst coolers among others.
C&I Leasing, a Nigerian company, provided transportation and installation services for mooring systems and subsea pipelines, while the Chinese Hangxiao Steel Structure Company provided steel structure for the refinery.
Belgian Jan De Nul Group carried out land reclamation on the 2,400 hectares.
Mammoet, a Dutch company, provided heavy lifting and transport solutions and South Korean Hyundai Heavy Industries built 15 liquefied petroleum gas tanks for the refinery.
Swiss-based Sulzer Chemtech supplied column internals, packing, and trays while MAN Diesel & Turbo, based in Germany, supplied two compressor trains.
Air Liquide Engineering & Construction, a French company, supplied the SMR units.
Fabtech (India), Schneider Electric (France), SOFEC (US), and WABAG (India) are the other suppliers involved in the refinery project.
Key facts facts about Dangote Refinery
- The Dangote Petroleum Refinery and Petrochemicals a subsidiary of Dangote Industries Limited, is the world’s largest single-train petroleum refinery.
- The 650,000 barrels per day (bpd) crude oil refinery with 838 KTPA polypropylene plant, covers area of approximately 2,635 hectares and is located in the Dangote Industries Free Zone, Ibeju-Lekki, Lagos.
- Total storage capacity of 4.5 billion liters which can cover: *20 days crude requirement *Product storage for 15 days of Nigeria’s gasoline consumption
- The Dangote Petroleum Refinery is an industrial plant that transforms crude oil into various usable petroleum products such as diesel, gasoline (petrol), jet fuel, and kerosene.
- The Refinery produces Euro-V quality gasoline and diesel, as well as jet fuel and polypropylene.
- The Refinery is designed to process a large variety of crudes including many of the African Crudes, some of the Middle Eastern Crudes, and the US Light Tight Oil.
- Dangote Petroleum Refinery can meet 100% of the Nigerian requirement of all liquid products (Gasoline, Diesel, Kerosene & Aviation Jet) and have surplus of each of these products for export.
- The Refinery is designed to use the latest technology to comply with stringent guidelines and regulations to protect the local environment, and at the same time produce the latest environmentally friendly petroleum product for worldwide markets.
- The Refinery design conforms to the World Bank, US EPA, EU, and Department of Petroleum Resources (DPR) emission/effluent norms.
- The Refinery has its own dedicated steam and power generation system with adequate standby units for reliable/uninterrupted utility supply to operating plants.
- It has a 435MW power plant that can meet the total power requirement of Ibadan Distribution Company, covering five states, including Oyo, Ogun, Osun, Kwara, and Ekiti.
- Dangote is one of the few companies in the world executing a Petroleum Refinery and a Petrochemical complex directly as an Engineering, Procurement, and Construction (EPC) Contractor.
- The Petrochemical Plant is designed to produce 77 different high-performance grades of polypropylene. Petrochemical is the source of raw materials for many manufacturing and assembling plants.
- It maximizes Gasoline which is in high demand-53%of the production capacity compared to 22% of the existing refineries in Nigeria.
- It maximizes value addition- Extract maximum value from every barrel of crude.
- It minimizes low-value Fuel Oil.
- The Refinery is estimated to generate an annual market value of US $21 billion for Nigerian crude oil, Foreign exchange savings/earnings of US $9.9 billion.
- 56% of the production would be exported, with a foreign exchange generation of approx. $17 billion.
- It ensures over $25 billion addition to the GDP, through massive value addition within the country.
- Products from the plant will serve as raw materials for the production of polyvinyl chloride (PVC), which is used extensively across a broad range of industrial, technical and everyday applications including widespread use in building, transport, packaging, electrical/electronic and healthcare applications.
- Dangote Industries developed a port and constructed quays with a load-bearing capacity of 25 tonnes/ sq meters to bring Over Dimensional Cargoes close to the site directly to handle liquid cargoes.
- The Jetty is situated at a distance of 12.3 km from the refinery thereby effectively reducing the travel time.
- The Refinery has capabilities for both land and sea evacuation to serve both domestic and export markets
- Dedicated marine facilities for off-take of crude and loading of petroleum products
• Self-sufficient marine facility with ability for freight optimization.
•Largest single order of 5 Single Point Mooring systems (SPMs) anywhere in the world.
•2 crude SPM for unloading ships up to ULCCs.
•3 products SPM for product exports up to Suez Max vessels.
•2 X 48″ sub sea crude pipelines with interconnection.
•3X24″subsea pipelines for products and imports.
•120 km subsea pipeline.
•Crude offloading capacity – 108,500 barrels/hour (17.25million liters /hr).
•Product loading capacity – 77,000 barrels/hour (12.32million liters/hr).
Dangote Petroleum Refinery maintains high standards for all its business practices, valuing health, safety, environment and rights for its employees, compliance with all applicable local and international laws, and being a committed partner to host communities, governments and also environment friendly.
