An Assessment Of Dangote’s Oil Refining Plans
The news that Alhaji Aliko Dangote, the richest man in Africa has decided to take the bull by the horns and make investments within the risky oil refining enterprise can solely be met with an optimistic response. Especially from more than 90% of the Nigerian populace who’ve recently been made to bear the brunt of high gas costs due to the controversial removing of subsidy on imported petrol merchandise.
Dangote is already an completed businessman with quite a lot of monetary muscle; and albeit the jury remains to be out on his close relationship with the present and past governments coupled together with his capability to ruthlessly monopolize the industries he invests in, we cannot completely disregard his contribution to the Nigerian financial system within the areas of job creation and the availability occidental petroleum earnings call of domestically produced commodities without us having to depend upon imported substitutes. In the world of competition, we merely can’t blame him for the signs of monopoly we find in his areas of business curiosity, the duty lies with the federal government whose accountability is to guard the interest and welfare of customers by promoting competition and forestall the abuse of monopoly energy.
The Nigerian billionaire plans to build an $eight billion refinery that will produce 400,000 barrels per day by the tip of 2016. Presently, we are only ready to supply under the 445,000 barrel per day mark by the mixed efforts of our 4 refineries in Port Harcourt, Kaduna and Warri. Nonetheless, the EIA states that the operational capability of these 4 refineries averaged only 24% in 2011. In accordance with OPEC, our native oil consumption stands at 267,000 barrels per day which implies that the proposed refinery could have the capacity to cater for our home consumption wants and also have substantial surplus to export to neighboring international locations.
Clearly, this is not considering the plans by the federal government to assemble three Greenfield refineries in Lagos, Kogi ad Bayelsa to be in operation by 2017 and the refurbishment occidental petroleum earnings call of the prevailing infrastructure. If we are able to get this proper, Nigeria can easily change into a internet exporter of refined petroleum products in ten years. occidental petroleum earnings call That is however a big “if” taking into account the myriad of things at the moment plaguing the industry.
Potential advantages to the Nigerian Economy
Refineries are expensive to keep up, they require top class administration within the hands of skilled professionals who’re conscious of the various operational and financial dangers encountered in their each day working. This is the place we are failing and it has provided the proper platform for saboteurs to make sure none of the existing refineries work at full capacity. This has led the nation to depend heavily on importing refined petroleum merchandise; a move which has been highly helpful to a few sturdy parties.
Breaking the Jinx
If Dangote can efficiently pull this off, it can instantly quell the myth that we can never get our refineries working at full capability or that we can’t refine 100% of the oil we’d like for domestic consumption. As many stakeholders have argued, this may even strengthen the truth that the private sector has a key position to play in fixing key macroeconomic issues within the country.
Few hands can compete with Dangote in his commodity refining and importation enterprise industries which he has efficiently ended up monopolizing. Nonetheless, the oil and fuel sector is a special ball sport as there are a lot of skilled personnel and involved events within the sector who may come together as formidable forces. They even have technical expertise and financial wherewithal to draw and companion with overseas investors in investing in petroleum refining within the nation. The burgeoning host of indigenous energy firms in the nation will likely be looking to leverage on the refining enterprise if this transfer pulls by. According to Forbes, Nigerian Abdul-Samad Rabiu is already constructing a $500 million cement plant in Edo state to rival Dangote cement. This gives us a trace of how successful and extremely lucrative companies can encourage competitors which will mechanically result in job creation.
Cost effectiveness and Job creation
This development has the potential of benefitting from economies of scale given the proposed capability of the refinery. Relying on how regulation and different elements work out, we could discover ourselves refining oil at a a lot cheaper rate which is able to put a severe dent to the prospect of importing petrol from overseas refineries. If the constituted authorities can be muster the courage to assist this, this could spell the tip of an era of large corruption and rent looking for conduct witnessed by the parties benefiting from the importation of refined petroleum merchandise. With extra transparency, this may ultimately result in the discount in pump prices in the long run if we consider how we can be eliminating the transportation price of exporting the crude and importing the completed product which is a key part of the pricing mannequin. As this might drive the creation of another profitable and engaging trade in Nigeria, we should be taking a look at prospects of job creation and acquisition of key skill sets and competencies in this important area of the downstream sector. It has already been mooted that over 2,000 jobs will likely be created and this quantity can solely develop by way of potential spin-offs and further investment.
We are eagerly waiting to see how the Nigerian authorities will react to this growth given its failure to resolve the issues plaguing our current oil refineries for decades now costing the nation trillions of naira. Loads of Nigerians might be retaining tabs on this improvement and it’s logical to counsel that giving his cordial relationship with the federal government, Dangote would possibly just be the man to open the flood gates and assist scale back the bottlenecks related to licensing and different regulatory necessities. It’ll also be attention-grabbing to see how the oil importers and energy brokers will reply to this contemplating the would possibly of the opposition they will be dealing with this time. Dangote has all of the ingredients to survive this battle as he has associates in excessive locations and also is aware of his politics in a risky business atmosphere like Nigeria.
Pricing will even be an interesting subject because the preliminary cost outlay of this project and different factors may stop us from immediately benefitting from a decreased pump value. It will even be attention-grabbing to see the position the NNPC will play considering its affiliation with the International Oil Corporations in the area of supply and in addition the PPPRA in relation to setting costs. The following 5 years will be an attention-grabbing one. Fingers crossed.