By Adewale Sanyaolu
FOR Nigerian investors who collected licenses for greenfield refineries but are yet to begin construction, this may not be a very good news. And that is because such licenses may soon become worthless pieces of paper in their hands once the 650,000bpd refinery comes on stream in 2018 as planned.
The completion of the Dangote Refinery project may also be a signal to tank farm owners that the day of import dependency may soon be over.
Already some tank farm owners, who spoke to Daily Sun at the weekend, expressed worries that the take-off of the refinery may signal a death knell for their businesses. But they would only have themselves to blame for surviving for so long on imported products rather than investing in local production and foreign exchange.
In Lagos, Apapa has the largest concentration of tank farms, dotting the entire stretch of the Apapa –Oshodi Expressway from Coconut bus stop to Dockyard Road.
The Apapa axis provides tank farm owners easy access to offloading of petroleum products once the vessels arrive at the Apapa ports.
In the last ten years, huge investments have gone into the tank farm business as a result of the low refining capacity of the country’s refineries located in Kaduna, Port-Harcourt and Warri.
A source from the major marketers while confirming the fears expressed by the tank farm owners, said once the Dangote refinery kicks off, it would be unprofitable to import petrol because it has capacity to meet local needs and for export.
‘‘A lot of these tank farm owners may be forced to sell it off because the capacity of the Dangote refinery is far in excess of the combined output of all the Nigerian National Petroleum Corporation (NNPC) refineries.
My worry is just the monopoly it would create for Dangote. Once the refinery kicks-off, I am sure every other operator would be muscled out,’’ he said.
But the Minister of State for Petroleum Resources, Mr.Ibe Kachikwu, while drumming support for the private refinery said ‘‘when the 650,000 refinery planned by Dangote Group comes on-stream by 2020, it would boost domestic refining capacity.
Kachikwu explained that the initiative behind the refinery was to drive the oil marketers to invest in the industry going forward.
Unlike Dangote, the Department of Petroleum Resources (DPR) had in 2002, approved License to Establish (LTE) to more than 18 private refineries, with only one coming on stream with 1,000 bpd capacity.
The refinery operated by Niger Delta Petroleum Resources, NDPR, produces only automotive gas oil, AGO, popularly called diesel.
Ordinarily, there are three levels of approval for setting up private greenfield (new) or modular refineries in the country. They are Approval to Establish, LTE; Approval to Construct, ATC, and Licence to Operate, LTO.
An investor must overcome the requirements in each level of approval before proceeding to the next, as shown in the guidelines.
DPR had explained that the guidelines for the establishment of modular refineries in Nigeria was configured with the aim of shortening the approval time for licensing of refineries.
During a recent visit to the Lekki Free Trade Zone site of the refinery, The Senior General Manager, Civil and Structural, Dangote Refinery, Madhar Kelkar, said the entire project is situated on 2600 hectares of land.
On what the nation stands to gain, he said: “I think every Nigerian would be very proud that Nigeria has the longest single train refinery in the world.
“With this project, Nigeria will reach self-sufficiency in little or no time and the vision is not just to supply the domestic market but to export to neighbouring countries to be able to generate some foreign exchange (Forex) for the economy.
“Besides, we will be generating and saving a significant amount of forex, so it is a massive investment for Nigeria,” he added.
President, Dangote Group,Alhaji Aliko Dangote, had recently assured Nigerians that when his refinery is ready, the country would no longer need to import petroleum products.
Dangote said his refinery would put an end to fertiliser importation in Nigeria, transforming the country into a net exporter of refined crude and fertilizer.
“Today, Nigeria imports 100 percent of its fertilizer, but when we finish, Nigeria will be the largest exporter of Urea and Ammonia in Africa,” Dangote said.
“The refinery is the largest single line in Africa and it will meet our total domestic requirement and save foreign exchange.
“Thirty-eight per cent of CBN’s foreign exchange is spent on importation of petroleum products. But we can serve the whole West African market.”
Dangote said he had been working with the government and the central bank of Nigeria (CBN) in diversifying the economy.
“We are going to serve the whole domestic market in the next 10 years and also export. We have actually been doing this for a very long time to diversify the economy.
“The government will lay down the policies. The CBN will assist in terms of long-term funding through the banks and even directly now because they have actually helped us quite a lot. That is what we are now trying to do.”
CBN Governor, Godwin Emefiele, had during a recent visit to the refinery site, said the apex bank would provide the needed foreign exchange for the refinery, adding that upon completion, the project would generate $6 billion dollars in foreign exchange for Nigeria.
“Imagine what would happen to the savings in foreign exchange by the time the fertilizer plant is completed in 2017 and by the time the refinery and petrochemical plant is completed during the early part of 2018.
“We expect that by the time these projects are completed, they will not only meet the needs of our domestic requirements – by the time they are completed, he (Dangote) will be exporting these products to the point where he will be selling foreign exchange to Nigerians and CBN to the tune of almost $6 billion yearly.
“That is the kind of project we think we should support and we think that we need to encourage more Nigerians to begin to think like Aliko Dangote.”
The Organisation of Petroleum Exporting Countries (OPEC), in its world oil outlook for 2015 said Dangote is responsible for nearly 50 percent of refinery projects in Africa for the next five years.