Business & Strategy

Dangote Refinery Expands Storage Capacity, Plans to Impact Fuel Prices

Written by Jerry Alomatu on June 14, 2024

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Port Harcourt, — Alhaji Aliko Dangote, President of the Dangote Group, announced an expansion of storage capacity at his refinery by 600 million liters, increasing total storage to 5.3 billion litres. This expansion aims to bolster the refinery’s role as a strategic reserve for Nigeria’s petroleum products.

Dangote disclosed this development during the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas. He revealed that his refinery currently holds a capacity of 4.78 billion litres of refined petroleum products.

International Challenges

Dangote alleged that international oil companies have been reluctant to sell crude oil to his refinery, citing efforts to impede his success. “In a system where, for 35 years, people are used to counting good money, and all of a sudden, they see that the days of counting that money have come to an end, you don’t expect them to pray for you,” Dangote explained.

Impact on Fuel Prices

When asked about the potential impact on petrol prices, Dangote did not provide a direct answer. However, he recounted the significant reduction in diesel prices following the refinery’s initial production. “When we first started, it was N1,700, and the dollar conversion was about N1,200 then. Immediately when we started, within two weeks we brought down the price to N1,000. We took it from N1,700 to N1,200 and from N1,200 to N1,000, we have given more than 60 percent drop in price,” he noted.

Strategic Reserves and Dirty Fuel Concerns

Dangote emphasized the refinery’s capacity to serve as a strategic reserve for Nigeria. “The country doesn’t have strategic reserves in terms of petrol, which is very dangerous. But in our plant now, when you came, we had only 4.78 billion litres of various tankage capacity. But right now we’re adding another 600 million,” he stated.

He also raised concerns about the importation of dirty fuel into Nigeria, which he linked to rising cancer cases. He urged the Federal Government to enforce regulations to prevent the import of such harmful products.

Future Plans and Challenges

Despite significant progress, Dangote revealed ongoing challenges, including resistance from local and international cartels. He recounted a conversation with former Saudi Energy Minister Khalid Al-Falih, who advised against building the refinery. “But Your Excellency, unfortunately, we have already started, so I’m not looking for an advice,” Dangote had responded.

Financial Achievements

Dangote highlighted the financial milestones of the refinery project, which has a $19 billion price tag. “We borrowed just over $5.5 billion. But we paid also a lot of interest as we went along… We now have only about $2.7 billion left to be paid,” he said.

Energy Independence

The refinery, along with other Dangote companies, generates 1,500 MW of power for self-consumption, reducing reliance on the national grid. This strategy aligns with Dangote’s vision for industrial parks where companies can “plug and play” without additional power generation costs.

Market Impact and Future Expectations

The Crude Oil Refinery Owners Association of Nigeria (CORAN) anticipates a reduction in petrol prices to around N300 per litre once the Dangote refinery and other indigenous producers commence large-scale production. Despite these projections, oil marketers suggest any reduction in pump prices will be marginal.

Dangote had previously announced that Nigeria would cease fuel imports by June 2024. However, due to minor delays, the release of premium motor spirit (PMS) is now expected between July 10 and 15, with market distribution planned for the third week of July.