How Dangote Refinery Will Boast Lagos State Economy
For fueling Nigeria’s economic transformation from importer to self-sustaining powerhouse
Nigeria is the largest oil producer in Africa, but due to a chronic shortage of refined petroleum products, filling stations sit empty or have only very low-grade fuel for sale. That means Nigeria not only has some of the worst air pollution in the world, it also stymies the country’s economic growth.
The Dangote Refinery could change that. When completed in 2021, it will rank as the largest oil refinery in Africa—and one of the largest in the world—processing 650,000 barrels of crude oil to produce 50 million liters (13.2 million gallons) of gasoline and 15 million liters (4 million gallons) of diesel fuel per day. And it will create nearly 35,000 jobs in and around Lagos.
Dangote Group launched the project in 2016 with an estimated investment of US$12 billion. The project team hit a major milestone in in December when it installed the world’s largest crude distillation column, a processing tube as long as a football pitch and as heavy as 320 elephants.
And while the team has faced obstacles ranging from supply-chain breakdowns to pandemic lockdowns, careful planning has kept the project on track to deliver on its goals, says D.V.G. Edwin, group executive director, strategy, capital projects and portfolio development at Dangote Group, Lagos.
What was the strategic impetus for Dangote launching this project?
Primarily, Nigeria exports raw materials and imports finished products. And when you import the finished product back, you are essentially importing poverty into the country. At Dangote Group, we have always focused on import substitution. It’s what we are doing in sugar and what we’ve done in cement. So we decided to adopt the same strategy for petroleum refining.
What impact will this project have within Nigeria and across Africa as a whole?
The number of people below the poverty level has been going up, because Nigeria has an import-based economy, where the currency has been weakening consistently. This refinery is going to be a game-changer for the country because, at a minimum, there will be a value addition to the treasury of US$10 billion, in terms of foreign exchange. So a key advantage will be the currency rate stabilization. And if you talk about Africa as a whole, that’s going to be a matter of pride, that Africa can be self-sustaining, as far as the refined products are concerned.
What was the major challenge of transporting the crude column 11,000 miles (17,703 kilometers) to the site?
There are very few shipping companies that can handle this kind of weight and length. The first vessel that we bought failed halfway through. It had to be towed to a nearby port and then we had to charter another vessel. We transferred it and then, halfway through, that vessel failed, too. So two vessels failed before we could change to a third one and bring it back.
Nobody was thinking about a global pandemic when this project started. How did your team adapt?
We decided earlier in the project to construct almost 45,000 houses within the site. The original plan was for about 25,000 houses, but we decided if there’s going to be a sudden delay and we need to accelerate the work, we will need houses for workers. So we invested in it like an insurance premium. And that helped us, because once the pandemic lockdown happened, we didn’t have all these people coming from outside and going back outside every day—we were able to bring all of them inside and keep them inside. So there was no stoppage; we didn’t lose a single day.
How can Dangote Group ensure the project delivers on the promised benefits?
The country has three refineries, but none of them have been working. The utilization level has been around 8 percent. While we have very highly skilled people, their exposure to and experience with refinery work is next to nothing. So we decided to focus on skill development and capacity building. We have already trained almost 300 people from the host communities and nearby areas. And we have sent more than 200 engineers overseas to gain skills in working refineries, so that they can come back and operate ours.
The energy sector increasingly is moving toward sustainable alternatives. How did Dangote Group position this project to succeed in that environment?
The globe has been migrating to Euro V, so the entire refinery was designed to produce Euro V fuel. With all the new regulations coming in, we will have nothing to fear, because we will be able to meet the quality standards. I can export this fuel to any country in Europe or the U.S. Also, the African market is mostly dependent on imported secondhand cars, so to replace those with electric cars is not going to be quick or easy. We believe that at least for the next couple of decades there will be a good market, especially within Africa, for gasoline, diesel and aviation fuels.