Nigeria is a vast country of over 200 million inhabitants (the population is expected to double by 2050), producing around 500,000 barrels of petroleum products a day (around 25 million tonnes a year). Consumption of petrol for cars is around 15 million tonnes (it fell by 30% after the new president, Bola Tinubu, decided to abolish subsidies, because the burden of these subsidies on the budget was unbearable and encouraged fraud at the borders). The country also consumes around 5 million tonnes of diesel, largely to power the small electrical generators needed by the population, as the national electricity network is very inadequate.

Oil production and refining before Dangote

Nigeria is a major oil producer. Its production was close to 2 million barrels a day a few years ago. It has fallen sharply, to no more than 1.4 million barrels a day by 2023, both for technical reasons (lack of incentives to find and produce new fields) and because of the theft of crude oil, estimated at 300,000 barrels a day, or nearly 20% of production. This stolen oil feeds small-scale, clandestine refineries that produce low-quality petrol and diesel.

Nigeria has several refineries. The oldest is the small refinery at Port Harcourt. In the early 1980s two refineries were built simultaneously, one at Warri in the oil-producing region near the Niger Delta, the other at Kaduna in the north. Each had a capacity of around 100,000 barrels a day. Around 1990, a new, highly sophisticated 200,000-barrel-per-day refinery was built in Port Harcourt.

The combined capacity of these refineries would, if they operated at full capacity, meet the country's needs. But these refineries, which have been operating at low capacity for many years, have been at a standstill for some time, forcing Nigeria to import most of its consumption. The poor operation of these refineries is probably partly due to maintenance problems, but it is probably mainly due to the fact that crude oil exports and product imports are denominated in dollars, which means that commissions are paid in hard currency.

NNPC has launched several refinery rehabilitation projects, but to date without much success. A new rehabilitation programme is underway and should enable the 3 refineries (Warri, Kaduna, Port Harcourt) to resume operations in a few months' time.

While the above-mentioned refineries are all owned by the NNPC (National Nigeria Petroleum Corporation), a state-owned company which covers the entire oil chain, a new refinery is now operational: the refinery built by billionaire Dangote.

The Dangote refinery

Launched in 2013 at an estimated cost of $9 billion, the refinery project came to fruition when it was inaugurated in May 2023. The 650,000-barrel-per-day refinery came on stream in early 2024. It is currently operating at more than 50% capacity, has already produced large quantities of distillates (diesel and jet fuel) and will gradually produce petrol.

This refinery has some unique features: it is one of the largest refineries in the world (the largest refineries - India, Venezuela - have a capacity of close to 1 million barrels per day, but there are very few of them, and the Dangote refinery is larger than most American and European refineries). What's more, this is a single-train refinery, which means that there is only one distillation column - the first processing unit in the complex, which serves as the basis for manufacturing the other products. This distillation column has a capacity of 650,000 barrels per day, whereas conventional distillation columns generally do not exceed 250,000 barrels per day.

Started up with considerable delay - a common occurrence in this sector - and with a final budget of more than 20 billion dollars, i.e. more than double the initial budget - again a fairly common occurrence, see Kashagan and Flamanville to name but a few recent examples - this is a highly complex refinery equipped with a large number of refining units that enable the bulk of the oil to be transformed into high-quality light products. The ramp-up appears to be fairly rapid, with the refinery's management predicting that, circumstances permitting, it will be operating at 80% capacity by the end of 2024.

Nevertheless, the project is facing major commercial and political difficulties

- When the project was conceived, the billionaire Dangote was counting on a supply that was not exclusively Nigerian. It should be noted that the refinery's capacity represents half of Nigeria's crude oil production, and Nigerian operators cannot abandon their other customers to supply the refinery.

- But the main difficulties at present revolve around crude supplies. The needs are enormous: dozens of cargoes of crude have to be processed every month. Recently, several cargoes of American crude have been purchased, which is undoubtedly not an optimal solution, as the refinery is designed to process heavy crudes, whereas American crudes (LTO) are light crudes that do not require complex processing.

- Feeding the local market is one of the options. It could help to reduce the country's supply costs, although it is planned that prices, like the prices of imported products, will be set in dollars. But the stated objective from the outset is to export widely.

Conclusion

A gigantic refinery on the scale of West Africa, the Dangote refinery alone could cover a very large proportion of ECOWAS's petroleum product needs. It is likely to enter into competition with the NNPC refineries if and when they are refurbished. Competition with other refineries in the sub-region could also be tough.

But this refinery certainly represents an asset for West Africa

Jean Pierre Favennec