Dangote Offers to Sell to NNPC Amid Regulatory Row
Aliko Dangote offers to sell his refinery to NNPC amid regulatory battles, accusing the authorities of unfair allegations and bias towards imported products.
Businessman Aliko Dangote stated that he would be prepared to relinquish control of his multibillion-dollar oil refinery to NNPC Limited, the state-owned energy firm.
The billionaire made his remarks during the most recent round of a savage argument with Nigerian regulatory bodies, as a fresh disagreement with one of the plant's major equity partners intensifies.
Following ten years of delayed construction, the $19 billion refinery with a capacity of 650,000 barrels per day was put into service last year. Its cost was more than double the original estimate and it was expected to help Africa's largest oil producer wean itself off of its reliance on foreign fuel and save up to 30% of the foreign exchange spent on importing goods.
“Let them (NNPCL) buy me out and run the refinery the best way they can. They have labelled me a monopolist. That's an incorrect and unfair allegation, but it's OK. If they buy me out, at least, their so- called monopolist would be out of the way,” Dangote.
“We have been facing fuel crisis since the 70s. This refinery can help in resolving the problem but it does appear some people are uncomfortable that I am in the picture. So I am ready to let go, let the NNPC buy me out, run the refinery.”
Dangote's ambitious venture into oil and gas is facing challenges in its early stages. Despite plans to launch its first petrol sales in Nigeria in August, the massive refinery has been operating at only half its capacity since starting operations in January. The plant's output has been hindered by difficulties in securing crude oil supplies from international producers.
The refinery has encountered obstacles in sourcing crude oil, with suppliers either demanding exorbitant premiums or claiming unavailability. Prior to the current dispute, NNPC had delivered only 6.9 million barrels of oil to the plant since last year, as of May. This limited supply has further constrained the refinery's operations.
The company has a long-standing supply agreement with NNPC Limited, which also agreed to acquire a 20% equity stake in the company as part of their partnership, dating back to the start of operations.
However, according to the refinery, just 7.2% of the total amount was paid for before the deadline for the firm to purchase the stock was given.
The refinery has looked to nations like Brazil and the US to fill the supply gap as it is being deprived of the feedstock needed to operate at its current capacity.
“As you probably know, I am 67 years old, in less than three years, I will be 70. I need very little to live the rest of my life. I can't take the refinery or any other property or asset to my grave. Everything I do is in the interest of my country.
“This refinery can help in resolving the problem but it does appear some people are uncomfortable that I am in the picture. So I am ready to let go, let the NNPC buy me out, run the refinery. At least the country will have high-quality products and create jobs,” he added.
The challenges facing my refinery have proven my friends and associates right, who advised me to exercise caution when investing billions of dollars in the Nigerian economy.
“Four years ago, one of my very wealthy friends began to invest his money abroad. I disagreed with him and urged him to rethink his action in the interest of his country. He blamed his action on policy inconsistencies and shenanigans of interest groups. That friend has been taunting me in the past few days, saying he warned me and that he has been proven right,” the businessman said.
Devakumar Edwin, Vice President of Oil and Gas at the Dangote Group, recently alleged that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has been permitting the importation of substandard fuel into Nigeria, accusing the regulatory body of negligence in its oversight.
The primary watchdog over Nigeria's midstream and downstream activities, Farouk Ahmed, has retaliated, claiming that both the diesel from the facility and the diesel from modular refineries like Waltersmith and Aradel have high sulfur levels.
In addition to being known to be bad for the environment because it accelerates global warming, high sulfur content fuel can damage car engines.
“The AGO quality in terms of sulphur is the lowest as far as West Africa's requirement of 50 parts per million (ppm). Dangote refinery, as well as some major refineries like Waltersmith refinery, produce between 650 ppm to 1,200 ppm. So, in terms of quality, their quality is much more inferior to the imported quality,” Ahmed had said.
Nevertheless, Dangote refuted the assertion when House of Representatives members, including Speaker Tajudeen Abbas, visited the Dangote Fertilizer Limited complex and the Dangote Petroleum Refinery.
According to a statement from the company, the representatives applauded the business for its large investments and contributions to Nigeria's development while also seeing the testing of automotive gas oil, or diesel, from two gas stations next to the Dangote Petroleum Refinery.
Dangote's diesel was found to have a sulfur content of 87.6 ppm (parts per million) in laboratory tests, while the other two samples had sulfur contents that were more than 1800 ppm and 2000 ppm, respectively.
Dangote refuted claims made by Farouk Ahmed, CEO of the Nigerian Midstream and Downstream Petroleum Authority, who had stated that imported diesel is superior to domestically refined products. Ahmed had alleged that Dangote refinery and other modular refineries produce diesel with high sulphur content, ranging from 650 to 1200 ppm. However, Dangote's findings contradict these claims, showing that his refinery produces high-quality diesel that meets international standards.
Dangote challenged the regulator to conduct an impartial comparison of the quality of refined products from his refinery with those imported, to determine what best serves Nigeria's interests. He emphasized the need for a fair assessment, free from bias towards imported products. Additionally, Dangote announced plans to put on hold his investment in Nigeria's steel industry to avoid accusations of monopolizing the market.
“You know, about doing a new business which we announced, that is, steel. Actually, our board has decided that we shouldn't do the steel because if we do the steel business, we will be called all sorts of names like monopoly. And then also, imports will be encouraged,” Dangote said.
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