The Nigerian National Petroleum Company Limited (NNPC) is reportedly facing challenges in meeting its obligation to supply crude oil worth $1 billion to the Dangote refinery, part of its payment for the acquisition of a 20 percent equity stake in the refinery.

According to a report by BusinessDay, quoting sources at the Ministry of Petroleum Resources in Abuja, Nigeria is currently at risk of losing a substantial portion of its equity in the Dangote refinery due to its failure to fulfill the obligations outlined in the agreement for the equity acquisition.

Against this backdrop, the report notes that the NNPC is urgently seeking to source crude oil from domestic producers, raising concerns among investors in the industry.

Since the 650,000 barrels-a-day Dangote refinery was commissioned in May, it has remained inactive, awaiting the supply of crude oil. The NNPC must fulfill its crude supply obligation to avoid the risk of losing part of its equity in the refinery.

The Nigerian government’s equity in the refinery is valued at $2.7 billion, with a payment mechanism that includes both cash and crude oil supply. As part payment, the government has paid $1 billion in cash, guaranteeing about seven percent of the equity.

The agreement also stipulated that the NNPC would provide crude oil worth $1 billion to the refinery upon completion, with the remaining $700 million to be paid through earned dividends from the plant’s operations, according to findings by BusinessDay.

The NNPC’s strategy to source crude oil from domestic producers has raised alarms, with concerns that it could deter investors from the industry. The government’s failure to meet its obligations under the equity acquisition agreement puts a significant portion of its equity in the Dangote refinery at risk.

It was recently reported that the NNPC plans to supply the Dangote refinery with up to six cargoes of crude oil in December for test runs. However, challenges in meeting the crude supply obligation raise uncertainties about the timeline for the refinery’s full commercial operations.

The Dangote refinery, built in Lekki, Lagos, by Africa’s wealthiest billionaire Aliko Dangote, was commissioned in May and is expected to play a crucial role in meeting Nigeria’s refined products needs and catering to the African and global market demand. However, the refinery has repeatedly failed to meet its operation commencement deadline, signaling underlying hindrances not known by the public.

The Nigerian government and the NNPC have kept details of the transaction private, contributing to concerns about transparency in the equity acquisition and payment process. Opposition from domestic producers and the potential loss of equity further complicate the aftermath of the long-anticipated Dangote refinery’s entry into operation.

Last Thursday, Bloomberg, citing analysts monitoring the plant’s progress, reported that the complete ramp-up of the refinery—a pivotal development for both regional and global crude and fuel markets—will require several months.

“The refinery is likely to be started up in a phased fashion, with the crude distillation unit being the first unit,” Ronan Hodgson, an analyst at Facts Global Energy, was quoted as saying.

Citing two NNPC officials who asked not to be named, BusinessDay reports that the facility is accumulating crude stocks for test runs, but the commencement of commercial production remains uncertain.

No argument there because the future of consumer telecom services includes satellite: “This growth is uncharacteristic in the sense of its magnitude. Whereas prior satellite service providers have ramped up to anywhere at most between 500,000 to a little bit over a million subscribers. And this has taken, you know, a ten-year period, Starlink’s race to 2 million subscribers has taken only the better part of two years.

“Starlink’s importance to SpaceX overall as a company is imperative. Euroconsult estimates that, optimistically, by the end of 2023, this business of Starlink could represent upwards of 40% of SpaceX’s overall business. This total would be somewhere in excess of $3 billion generated from Starlink”.

CDMA gave wired-telephony heat in Nigeria and prepared NITEL for the big museum. But GSM took down CDMA. Satellite is an existential threat to GSM operators in Nigeria because the regulator is allowing them to go DIRECT to customers (D2C) and that is significant. With the D2C business model, the marginal cost efficiency of satellite broadband will compound over time, and by 2030, GSM operators will lose ground. Yes, they will struggle in rural areas and less densely populated locations

Elon Musk and Space Starlink are setting a new basis of competition and they will take down empires in the telecom space. This is real!

Comment on Feed

Comment 1: ou make a great point about satellite internet companies using a direct-to-consumer (D2C) model. This lets them sell right to customers instead of just selling to other companies.

D2C is what can help satellite compete better over time. When satellite operators own the full customer experience, they make more money per user. This lets them lower costs as they grow.
Older internet companies can’t keep up because they rely on reselling satellite bandwidth.

They don’t control the customer relationship.
It’s like how CDMA wireless competed with landlines. And how GSM beat CDMA. The new technology that sells direct to users eventually wins out.

Satellite internet is still early. But with costs dropping and D2C adoption growing, they are positioned to disrupt current leaders. Exciting to see how satellite will impact internet competition down the road!

Thank for sharing Ndubuisi Ekekwe

My Response: “Older internet companies can’t keep up because they rely on reselling satellite bandwidth.” – you have explained the major difference between satellite generation 1 and the new model. That business model is the reason why Starlink has a promise.

Experts Estimate That Starlink is Well-Positioned to Capture A Big Piece of The Global Market For Consumer Satellite Services