The refinery we have been praying for.

It is not every day you get driven by a
billionaire. I had to enjoy the moment as
Forbes’ Africa’s richest man, Alhaji Aliko
Dangote, got behind the wheels last
Sunday. We were heading for Victoria
Island from Ikoyi, Lagos State, for a
briefing on his proposed refinery. He was
wearing a simple short-sleeved shirt and
a pair of jeans, too simple for the
wealthiest black man. I could not but ask
him: “So you drive yourself?” He said,
“Mostly at weekends.” He even had a
story to tell me: “There was a day I was
driving and the traffic lights stopped me.
Some guy looked out of his car and saw
me. He appeared surprised. He asked, ‘So
you know how to drive?’ I simply laughed.
Why would I not know how to drive?!” I
teamed up with him to laugh it off.
When I heard the news of Dangote’s plan
to build a 400,000-barrels-per-day
refinery, I was amazed. I’m not sure most
Nigerians know the significance of what is
about to happen. Let us make some sense
out of it. In 1965, General Yakubu Gowon
built Nigeria’s first refinery which we call
“Port Harcourt I” with a capacity of
60,000bpd. Ten years later, Gowon
awarded the contract for the construction
of Warri Refinery with a capacity of
100,000bpd. It was completed and
inaugurated by General Olusegun
Obasanjo in 1978. Obasanjo himself
started the 100,000bpd Kaduna Refinery,
which was inaugurated by President
Shehu Shagari in 1980. “Port Harcourt II”,
also started by Obasanjo, was completed
by Gen. Ibrahim Babangida in 1989 to
process 150,000bpd. Since then, we have
stopped building refineries - even though
our consumption has been doubling and
tripling.
All the refineries built by the government
since we discovered crude oil have total
installed capacities of 410,000bpd, almost
equal to what one man is about to build.
And, of course, you and I know that
government refineries barely produce
anything. That is why we keep importing
petroleum products. Even if they work at
full capacity, they cannot meet the
demand. Only God can give us the
accurate figure of the trillions of naira we
have wasted importing fuel, including cost
of freighting, demurrage, storage at
fraudulent tank farms, fraudulent subsidy
payments, bank charges, and such like,
since Gen. Sani Abacha’s time. This is to
say nothing about the opportunity cost -
how much could we have been
generating if we were refining and
exporting products? How many jobs
could have been created?
I had called Dangote on phone to get
some facts on his proposed refinery. After
talking for some minutes, he said it was
better we saw face to face. One of the
questions troubling my mind was: since
the downstream sector has not been
deregulated, how does he hope to make
money? Over the years, I had been
campaigning for more refineries to be
built. I once suggested that government
should build and lease out the
management, with the ultimate goal of
selling them off through privatisation. I
even suggested at a stage that local
entrepreneurs should be empowered with
oil blocks with the sole aim of
encouraging investment in refineries. I
was told to shut up, that I was not an
economist and that I didn’t know
anything about market forces. I was
lectured that without deregulation,
nobody would build new refineries.
So why is Dangote building a refinery
without deregulation?
“I will explain,” he said, as we settled
down in his yacht, anchored at Walter
Carrington Crescent, Victoria Island. I was
devouring cashew nuts with the kind
assistance of a glass of Coke while he was
dealing gently with tea. “With or without
deregulation, there is nothing stopping
anyone from building a refinery. I am not
a marketer. All I will do is buy crude oil at
the market price, refine and sell to
marketers at the market price. It is
marketers that deal with subsidy. If
government continues to subsidise,
marketers can buy products from us and
then collect the subsidy from
government. If not, they can sell to
motorists at the market price. It’s not
complicated. Don’t forget that when they
go to foreign refineries to import petrol,
they buy at the market prices before
coming home to claim subsidy payments.”
That was a startling revelation for me.
Deregulation is clearly not an obstacle to
building a refinery in Nigeria. Maybe I
should have built a refinery myself (don’t
laugh) instead of fruitlessly suggesting it
to the government. Why didn’t I think of
this all along? Well, it is not a 10 kobo
business. That is why. The Dangote
projects - a fertilizer plant in Edo,
petrochemical and petroleum refining
plants situated at Olokola in Ogun and
Ondo states - will cost him $9 billion, for
which he has sourced $3.3 billion loan
from local and international banks. If the
refinery was a government project, it
would probably cost $15 billion by the
time politicians, party chieftains and the
middlemen in the private sector massage
the figures. Dangote’s refinery, according
to estimates, will create 9,500 direct jobs
and 25,000 indirect jobs when completed.
The story continues. Recent developments
in the international crude oil market are
not particularly in Nigeria’s favour. The
world is developing alternatives to crude
oil. Nigeria’s biggest customer, the United
States, has scaled down oil imports from
Nigeria, from the height of 1.1 million
barrels a day to a little over 200,000. That
is massive. We’re now practically hawking
our oil like groundnut sellers inside Lagos
traffic. Our biggest customers are now
India and China. It takes 18 days to ship
crude to the US, compared to 35 days to
China. This has implications for finance.
Some varieties of Nigerian crudes,
meanwhile, are not preferred in the
international market since they are only
good for gasoline but not so much for
Euro IV diesel. Apart from the lesser
diesel output, it is more difficult to get the
correct density and some of the other
specs. Therefore, even our Sweet Crude
(Bonny Light) has its limitations.
“With global demand for crude oil
projected to keep dropping,” Dangote
said, “the way forward is for us to start
exporting refined products rather than
crude. We will get far much better value
that way. In the next five to seven years,
we should stop exporting crude
altogether. Apart from South Africa, the
refining capacity in Sub-Saharan Africa is
grossly insufficient. Angola has a refinery
that can only handle 30,000 barrels per
day, whereas they consume 120,000
barrels. Cote d’Ivoire refines 60,000.
Niger Republic is just 20,000. Ghana has
45,000. That is why our primary target is
the regional market. Other African
countries will be coming to buy products
from our refinery when it is completed by
2016, insha Allah. That is our strategic
plan.”
We finished chatting and took a boat
across to the Lagos Motor Boat Club,
Ikoyi, from where we had driven to
Victoria Island an hour earlier. He saw me
off to the gate as we chatted on other
matters of interest, including swimming. I
jumped into my car and drove off,
imagining myself as a billionaire driving a
young journalist to my yacht for an
interview. Not a bad act to follow.
And Four
Other Things...
OANDO AND IBORI
A day to an international bond issue by
Oando Plc to pay for its purchase of
ConocoPhillips’ assets in Nigeria, a story
surfaced in the foreign media quoting a
British prosecutor as saying former Delta
State governor James Ibori had 30 per
cent stake in Oando. The prosecutor
actually said Ibori “claimed”. This has
impacted negatively on Oando’s shares,
and the Conoco deal is in danger. Oando
has denied Ibori’s claim, insisting that
this same allegation has been investigated
for nearly 10 years without any proof. I
think this issue should be properly
investigated so that we can come to
closure. However, the timing of the re-
digging of this allegation appears curious
to me...
AKPABIO’S CROSS
Governor Godswill Akpabio has been
under attack because of his open support
for the President Goodluck Jonathan in
the current political crisis and, quite
tenaciously, the Akwa Ibom governor is
not wavering. He told Jonathan’s
opponents that he has a duty “to make
the president succeed”. For me, we
cannot all belong to the same camp and
those who choose to pitch their tents
elsewhere, like Akpabio, should be
allowed to be, in true democratic spirit. I
completely object to this notion that “if
you are not with us, then you are a devil”.
Let Jonathan’s friends and foes show their
true strengths in the ballot when the time
comes.
BOKO HARAM IN ABUJA?
On Friday, Nigerians were greeted with
the news that Boko Haram militants had
engaged members of the Joint Task Force
(JTF) in a shoot-out at Apo Quarters,
Abuja, which left eight persons dead. It
was reported that the soldiers were
attacked by the militants on trying to dig
up arms said to have been buried at an
uncompleted building. Boko Haram had
only operated in Abuja through
bombings, but the report of foot soldiers
carrying arms seemed to be a new
development. What we are hearing now is
that those killed were innocent, unarmed
squatters, contrary to the official line. This
has to be thoroughly investigated by the
National Human Rights Commission.
DRAMA IN EKITI
Since Hon. Opeyemi Bamidele indicated
his interest to challenge incumbent
governor of Ekiti State, Dr. Kayode Fayemi,
in the 2014 governorship election, the
story has not been palatable. His father
was immediately removed as the APC
chairman in Iyin Ekiti Ward 1, and he
momentarily lost his leadership of the
Ekiti caucus in the House of
Representatives. His attempt to hold a
rally last Thursday was disrupted by thugs
and police, who fired teargas to disperse
his supporters despite initially granting
approval. The police said it was disrupted
because it was a premature “political
campaign” and not a “rally”. God save us.