Understanding NNPC Stake In Dangote Refinery

By Emeka Nwankpa

Here we go again! Our nation has become a place where serious
issues become jokes on the social media. On trending is the talk
over NNPC’s proposal to acquire a 20 per cent equity stake in the
upcoming Dangote Refinery worth $2.76 billion.

One does not have to be a certified oil investment expert but
facts in the public space indicate that the Federal Executive
Council approved the proposal as a national energy security plan
for all Nigerians whose lives and livelihood revolve around petrol
products. Can anybody be more concerned and patriotic? And for
coming up with such plan in a nation currently on the throes of
crime and criminality, NNPC should rather be commended not
vilified.

The Dangote project has the largest single train petroleum
refinery in the world with the capacity to produce enough to meet
Nigeria’s petrol needs and for export. It can meet 100 per cent of
the nation’s requirement with refined products, namely petrol,
diesel, kerosene and aviation fuel with much surplus of each of
these products for export. This should mark a new dawn for our
nation, Nigeria!

We should avoid comparing apples with oranges. The decision of
NNPC to take a 20 per cent stake in the Dangote Refinery is in line
with a government directive stipulating the mandatory participation
of the corporation in any privately owned refinery that exceeds
50,000 barrels per day capacity. The step is consistent with its
corporate objective to grow the domestic refining capacity and
improve petroleum products supply from local refineries.

There is a sound justification in investing in a private sector
driven project: A resource-dependent country such as Nigeria cannot
but show interest, and have a stake, in a business that borders on
energy security and has fiscal security implications for the
economy.

Now to more facts: NNPC’s 20 per cent acquisition stake
translates to 130,000 barrels per day (bpd) capacity from the brand
new 650,000 bpd Dangote Refinery for $2.76 billion whereas the
comparison with Hollyfrontier only seeks to acquire 97-year-old
115,000 bpd refinery from Sinclair Oil for $2.6 billion.

The Hollyfrontier deal alongside its affiliate, Holly Energy
Partners, seeks to acquire almost all of Sinclair Oil’s refining,
renewable diesel and logistics assets for $2.6 billion. It is not
the same as the acquisition of the 20 per cent stake in Dangote
Refinery by the NNPC.

Equally misleading is the lame assumption that Hollyfrontier is
buying 678,000 bpd refining capacity from Sinclair for $2.6
billion. Fact is that the combined business of Hollyfrontier and
Sinclair has an expected refining capacity of 678,000 bpd after the
acquisition. Hollyfrontier already has refineries; it is only
adding Sinclair’s two refineries, with a combined capacity of
115,000 bpd to its portfolio.

Of the 115,000 bpd capacity, the first refinery, with a capacity
of 85,000 bpd, was built in 1924, 97 years ago while the second
refinery, with a capacity of 30,000 bpd, was built in 1992. Only
two refineries are being purchased here.

It is downright irrational to compare a facility built 97 years
ago with the modern, state-of-the-art and technology-driven Dangote
Refinery.

But NNPC is not the first national oil company to buy equity in
other refineries. For example, in 2017, Rosneft a Russian
government-owned oil company acquired a 49 per cent stake in
India’s Essar refinery with a capacity of 400,000. In 2019, Saudi
Arabia’s Aramco had almost concluded a deal to acquire a 20 per
cent stake in reliance refinery-owned by Mukesh Ambani group before
COVID-19 pandemic struck.

All points considered, the NNPC Dangote equity stake acquisition
deal is a win-win for the Nigerian people. It will erase, by a
single stroke, the current importation of refined petroleum
products that continues to gulp our scarce foreign reserves.
Nigerians will sing Hosanna as subsidy is buried.

Our struggling naira automatically rebounds with more money
freed into the Federation Account. As thousands of jobs are being
created, the sad spectacle of petrol scarcity for which NNPC is
bleeding through subsidy payments will be over.

Emeka Nwankpa wrote from Abuja.

By Emeka Nwankpa

Here we go again! Our nation has become a place where serious
issues become jokes on the social media. On trending is the talk
over NNPC’s proposal to acquire a 20 per cent equity stake in the
upcoming Dangote Refinery worth $2.76 billion.

One does not have to be a certified oil investment expert but
facts in the public space indicate that the Federal Executive
Council approved the proposal as a national energy security plan
for all Nigerians whose lives and livelihood revolve around petrol
products. Can anybody be more concerned and patriotic? And for
coming up with such plan in a nation currently on the throes of
crime and criminality, NNPC should rather be commended not
vilified.

The Dangote project has the largest single train petroleum
refinery in the world with the capacity to produce enough to meet
Nigeria’s petrol needs and for export. It can meet 100 per cent of
the nation’s requirement with refined products, namely petrol,
diesel, kerosene and aviation fuel with much surplus of each of
these products for export. This should mark a new dawn for our
nation, Nigeria!

We should avoid comparing apples with oranges. The decision of
NNPC to take a 20 per cent stake in the Dangote Refinery is in line
with a government directive stipulating the mandatory participation
of the corporation in any privately owned refinery that exceeds
50,000 barrels per day capacity. The step is consistent with its
corporate objective to grow the domestic refining capacity and
improve petroleum products supply from local refineries.

There is a sound justification in investing in a private sector
driven project: A resource-dependent country such as Nigeria cannot
but show interest, and have a stake, in a business that borders on
energy security and has fiscal security implications for the
economy.

Now to more facts: NNPC’s 20 per cent acquisition stake
translates to 130,000 barrels per day (bpd) capacity from the brand
new 650,000 bpd Dangote Refinery for $2.76 billion whereas the
comparison with Hollyfrontier only seeks to acquire 97-year-old
115,000 bpd refinery from Sinclair Oil for $2.6 billion.

The Hollyfrontier deal alongside its affiliate, Holly Energy
Partners, seeks to acquire almost all of Sinclair Oil’s refining,
renewable diesel and logistics assets for $2.6 billion. It is not
the same as the acquisition of the 20 per cent stake in Dangote
Refinery by the NNPC.

Equally misleading is the lame assumption that Hollyfrontier is
buying 678,000 bpd refining capacity from Sinclair for $2.6
billion. Fact is that the combined business of Hollyfrontier and
Sinclair has an expected refining capacity of 678,000 bpd after the
acquisition. Hollyfrontier already has refineries; it is only
adding Sinclair’s two refineries, with a combined capacity of
115,000 bpd to its portfolio.

Of the 115,000 bpd capacity, the first refinery, with a capacity
of 85,000 bpd, was built in 1924, 97 years ago while the second
refinery, with a capacity of 30,000 bpd, was built in 1992. Only
two refineries are being purchased here.

It is downright irrational to compare a facility built 97 years
ago with the modern, state-of-the-art and technology-driven Dangote
Refinery.

But NNPC is not the first national oil company to buy equity in
other refineries. For example, in 2017, Rosneft a Russian
government-owned oil company acquired a 49 per cent stake in
India’s Essar refinery with a capacity of 400,000. In 2019, Saudi
Arabia’s Aramco had almost concluded a deal to acquire a 20 per
cent stake in reliance refinery-owned by Mukesh Ambani group before
COVID-19 pandemic struck.

All points considered, the NNPC Dangote equity stake acquisition
deal is a win-win for the Nigerian people. It will erase, by a
single stroke, the current importation of refined petroleum
products that continues to gulp our scarce foreign reserves.
Nigerians will sing Hosanna as subsidy is buried.

Our struggling naira automatically rebounds with more money
freed into the Federation Account. As thousands of jobs are being
created, the sad spectacle of petrol scarcity for which NNPC is
bleeding through subsidy payments will be over.

Emeka Nwankpa wrote from Abuja.