Dangote’s $8 billion Refinery

Fri, Apr 19, 2013

By publisher

4 MIN READ

THE quest by the federal government, civil society, labour unions and well-intended Nigerians to have investors build refineries in the country is about becoming a reality. A privately-built refinery that can end importation of fuel products into the country is now in the offing. Aliko Dangote, chairman of Dangote Group of Companies, has said that he will build an $8 billion new refinery which will run at a profit even if the government decides not to remove fuel subsidy.

Dangote was quoted as saying that his company has done the “numbers for building a new refinery and the numbers are okay.” The proposed refinery will have an in-built capacity of refining 400,000 barrels a day by 2016. Dangote told Reuters the refinery will not only help Nigeria but other countries in the sub-saharan Africa. “There has not been a new refinery for a long time in sub-saharan Africa”, he said, adding that when the new refinery starts producing, the country’s ability to import fuel would soon be challenged.

“In five years, when our population is over 200 million, we won’t have the infrastructure to receive the amount of fuel we use. It has to be done,” he said. This will not be the first time Dangote has ventured into the refinery business. At the twilight of Olusegun Obasanjo’s administration, Dangote through the Blue Star Consortium, purchased the Kaduna Refining and Petrochemical Company at the sum of $720 million.

But his effort to revamp the refinery was truncated when late President Umaru Musa Yar’Adua cancelled the sale and returned Blue Star’s money. Yar’Adua’s action followed protest-by labour union which resisted the sale. The union was backed by the management of the Nigerian National Petroleum Comporation, NNPC, led by Abubakar Yar’Adua, former group managing director, who insisted that they could get the refineries working within a short time if funds were made available for its turnaround. Since then, the refinery had never produced at optimum capacity despite the repairs and maintenance done on it.

Parker Drilling in Bribery Seam

The United States Justice Department has revealed how Parker Drilling Services paid government officials bribe between January to May 2004. The justice department also fined the company 11.76 million for transferring $1.25 million to an agent who reportedly spent the money to entertain Nigerian government officials including those from the state security service, ministry of finance and a delegation from the president’s office.

A statement from the Justice department quoted court documents, saying that in 2001 and 2002, Panalpina World Transport (Nigeria) Limited, working on Parker Drilling’s behalf, avoided certain costs associated with complying with Nigeria’s Customs laws by fraudulently claiming that Parker Drilling rigs had been exported and then re-imported into Nigeria.

In late 2002, Nigeria formed a government commission, commonly called the Temporary Import Panel, TIP, to examine whether Nigeria’s Customs Service had collected certain duties and tariffs that were due to Nigeria. In December 2002, the TIP commenced proceedings against Parker Drilling. It later determined that Parker Drilling violated Nigeria’s customs law and assessed a $3.8 million fine against Parker Drilling. The court document stated that rather than pay the assessed fine, Parker Drilling contracted indirectly an intermediary agent to resolve its customs issues.

“From January to May 2004, Parker Drilling transferred $1.25 million to the agent who reported spending a portion of the money on various things, including entertaining government officials.”

Oil and Gas revenue Moves Up

The federal government recorded an improved revenue from oil and gas in the month of March compared to what it netted in February. It got N595.7 billion $3.8 billion) revenue in March which represents an improvement over the N571.7 it received in February. However, this figure is much lower than the earnings in the corresponding period in 2012 totalling N726.8 billion.

The oil and gas sector in the country witnessed disruptions due to facility shutdowns and oil theft. Oil theft affected production of Bonny Light and Forcados grades as well as Qua Ibeo. Crude oil production fell in March when Shell Nigeria shut production at its Qua Iboe terminal and Eni-operated Brass Terminal. There was also maintenance work at Okono, Brass and Amenam terminals.