Dangote Refinery is set to receive its initial shipment of crude oil within the next two weeks. Starting in October, the refinery is poised to commence production at a capacity of up to 370,000 barrels per day (bpd) of diesel and jet fuel, according to a senior company executive who spoke to S&P Global Commodity Insights.
This is coming after the company failed to meet an earlier production deadline, previously set for August. The deadline was set in May during the official inauguration of the refinery by former president Muhammadu Buhari.
In an exclusive interview with S&P Global, Devakumar Edwin, the Dangote Group Executive Director responsible for overseeing the $19.5 billion refinery project, provided insights into the project’s production timeline. He discussed the flow of crude oil and various petroleum products, shedding light on the challenges and delays that have plagued the project since its initial proposal in 2013.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
“Right now I’m ready to receive crude,” said Edwin. “We are just waiting for the first vessel. And so as soon as it comes in we can start.”
Edwin, formerly in charge of Dangote Cement, revealed that the refinery’s launch will occur in stages. The initial phase will involve the production of 350,000-370,000 barrels per day (bpd) of diesel and jet fuel. This phase is expected to commence in October, coinciding with the completion and online operation of key units such as the crude distillation unit, sulfur block, and hydrogen plant.
Then on November 30, he said, the refinery will start the phased ramp-up to 650,000 bpd, around half of it petrol, the key area of Nigerian fuel demand.
Edwin said the delay is a result of some issues surrounding the refinery’s construction site. He explained that after buying 33 square km of land in Lagos state for $100 million, the team found more than 70% of the plot was swamp and spent a year clearing it.
“Then, faced with the possibility of rising sea water claiming the land in the next 70 years, Dangote spent $50 million elevating the land by 1.5 meters.
“We had to hire the world’s largest dredger, second largest dredger, and third largest dredger to… pump in about 65 million cubic meters of sand,” he said.
In June, Energy Times reported that the Dangote Refinery had reached an 88% completion stage. However, there were still some equipment deliveries pending from manufacturers, and the ones that had been installed had not yet undergone the necessary integrity tests for commissioning. The report also highlighted that various aspects of the production lines, including electrical work, were significantly delayed.
Since the August deadline elapsed, speculations have grown around the production commencement of Dangote Refinery, with a report that it has received a license to import petroleum products.
According to S&P Global analysts, the Dangote Refinery is not expected to reach its full operating capacity until around mid-2025, and there is a possibility of further delays. Despite these delays, forecasts from S&P Global indicate that Nigeria’s production of petrol is expected to surpass imports until the 2040s, largely due to the contributions of the refinery once it becomes fully operational.
Although the refinery was designed to process light sweet Nigerian crude, state-owned Nigerian National Petroleum Company (NNPC) Limited, which is a shareholder in the project, cannot supply the refinery until November, Edwin said, so Dangote is buying oil from trading houses. Vitol and Trafigura recently carried out inspections of the plant, he said.
“At the last minute [NNPC] said, ‘We have actually committed our crude on forward basis to someone else’, so immediately they don’t have the crude,” he said. This is a temporary issue, and the refinery should run on exclusively Nigerian crude by November, he said.
That Nigerian oil will be purchased in US dollars, not naira as some reports had suggested, because it is located in a free zone on the outskirts of Lagos, Edwin said. However, NNPC will supply some crude at knockdown prices due to its equity stake.
Edwin said the scale of the refinery meant being “solely dependent on Nigerian crude would not be advisable”, meaning the refinery can process most African crudes, apart from heavy Angolan grades, as well as Middle Eastern Arab Light and even US light tight oil.
“We can even take some of the Russian grades… if the global system opens up to allow us to receive [them],” he said.