Aliko Dangote – Dangote refinery commissioning: Why we went into oil business

 

Aliko Dangote – Dangote refinery commissioning: Why we went into oil business

FOR Africa’s richest man, Aliko Dangote, it is about determination and doggedness, steeped in fortitude that is today yielding dividends.

For eleven, consecutive years, he has been the richest man in Africa according to both Forbes and Bloomberg.

A graduate of Al-Azhar University in Cairo, Egypt, Dangote began his business career in 1978, trading in rice, sugar and cement before he ventured into full-scale manufacturing.  The Group he founded currently has a presence in 17 African countries and is a market leader in cement on the continent.

One of the Group’s subsidiaries, Dangote Cement Plc, is the largest listed company in West Africa and the first Nigerian company to join the Forbes Global 2000 Companies list. The Group has two other subsidiaries: Dangote Sugar Refinery and NASCON Allied Industries listed on the Nigerian Exchange Limited (NGX).  Now, you can add Dangote Petroleum Refinery and Petrochemicals, located in the Dangote Industries Free Trade Zone Area of Ibeju-Lekki, Lagos.

Dangote is one of the few companies in the world executing a Petroleum Refinery and a Petrochemical complex directly as an Engineering, Procurement, and Construction (EPC) contract.  Globally, apart from three companies, no individual owner has done the complete EPC Contract for a Petroleum Refinery.

Many may never know what Aliko Dangote endured to birth this latest project. Contrary to the naysayers who think it came easy, Vanguard can authoritatively assert that the construction of the largest refinery in the world faced serious, humongous challenges.

Ponder the  following:

How do you deal with a situation whereby your imported consignment for the refinery is about 70% of the total cargo at the ports in Lagos, yet, you can not get them out?

How do you bring in equipment that would weigh about 3000 tons, when the capacity of your ports is between 200 and 250 tons?

Even after succeeding in bringing the equipment in, on which road would you transport them?

What do you do when the biggest crane in the country is 650 tons, whereas you need a 5000-ton capacity crane?

Worse, there were only two such 5000-ton capacity cranes in the world, and they were in use.

So, instead of hiring a crane for $300,000 a day, what do you do?  Dangote bought his cranes.

There are a lot of over-dimensional cargoes like the heaters and pipes, so, Dangote had to sign a contract with a company to do the transportation into its yard and had to pay over $70 million just for that.

Inside the plant itself, Dangote constructed about 126 km of road. There are 54,000 storm columns built for protection

On-site, there are over 200 buildings.

Piecing together the thoughts of Aliko Dangote through statements, speeches and his celebrated interview with Francine Lacqua, an anchor on Bloomberg TV in London, in 2017, we present the reason why Dangote went into the oil business.

Today, he is celebrated globally as the one who has built the world’s largest petroleum refinery and it is based in Nigeria.  Its commissioning had been thought impossible on a day like this.  But by dint of hard work, sleepless nights, logging of thousands of kilometres all over the world and the thousands of dedicated staff of Dangote Group, today is the day of commissioning.

Going into the oil business

Well, let me tell you why we had to go into oil. Our strategy was to be an African company. When you look at the other options, it’s agriculture — and agriculture doesn’t take that much money. We always invest most of our money back into the business, so when we looked at it in 2015 and projected our revenue for the next few years, we looked at what we had left after investing in fertilizer and realized we still had billions of dollars we could put somewhere else. The only place we could invest that much money was in the oil and gas business. So the refinery takes those dollars and allows us to invest in something we are used to, which is industry.  The majority of people here made their money through oil. But we have never dealt with oil, which is to prove that you don’t have to be in oil. In Nigeria, oil has damaged our thinking. Everyone is thinking about oil, oil, oil. And we are one company that has made a success without doing that. Also, people always say, “Oh, he’s in oil and gas—there’s a lot of corruption in oil and gas.” We didn’t want to be a part of that. There are a lot of friends of mine in oil, and they are doing the right things. But I didn’t want to be a suspect, so that’s why we didn’t go into oil earlier.

Why go so big?

In business, you need to know before you jump into something. You have to do quite a lot of homework. For instance, Nigeria’s refineries were privatized in 2007. We bought two, but after a few months, we had a new government that decided to void the transaction.

So, since 2007, we’ve been working on building our refinery, but we didn’t finally start something until 2015. Here the capital investment are huge—much larger. And if you are not a big player, you have no way of survival”

The journey to building the largest refinery in the world

We had already studied doing 300,000 barrels a day back in 2005. At that time I couldn’t even fathom a larger refinery. I had no financial capacity. Then in about 2010, we paid up Dangote Group’s debts, which amounted to $2 billion, and then started accumulating cash. When we decided to build the refinery of our dreams, we reviewed our plans again and put the figure at 400,000. Then it jumped up to 650,000bpd. So a refinery had been on the drawing table for years, but this is how we were able to finally push it through.

I don’t have that worry about not completing it. We have the most robust team anyone can put together, and we’ve been doing this sort of work together for years. We have never failed in delivering any project

It’s an ambitious project, yes, but we have others at that particular site, too. We have a gas pipeline, for instance. We are trying to bring gas to Nigeria. The total gas that will come out is at par with the likes of Shell and other oil firms. This will transform Nigeria because, as we speak, we have about 6,800 megawatts of power capacity that have been installed but not been put to use, the reason being that we don’t have the infrastructure.

We don’t want to listen to the critics, because they intend to destroy us. We are using our own money. This is my lifetime project. I have to back it up with my own life to make sure it is delivered. I know that, yes, it’s true, a lot of people have tried to deliver on refineries in the past, mostly governments. They couldn’t.

Prudence and humility

I’m not a person who just likes to throw away money. I spend more money on charitable things than myself. Luckily, myself and my children, have been very disciplined. That’s why if you look at it today, because of the way I run my lifestyle, I don’t have any home outside Nigeria. I stay in hotels. Quiet. Simple. My life is not very lavish, and I get very embarrassed if I try to show that I have money. I don’t.

I think I always advise people that it’s better to be very communal. In Lagos, I drive myself around on weekends. I ask my driver to go have a rest, and then I drive myself around. I still visit the normal friends I grew up with. My house is open 24 hours a day for them. I mingle with everybody. That’s the only way to get to know what’s going on.

Facts Sheet On Dangote Petroleum Refinery

• World Class Projects

• The Dangote Petroleum Refinery is located in Ibeju-Lekki, Lagos, covering a land area of approximately 2,635 hectares (seven times the size of Victoria Island.)

• World’s Largest Single-Train 650,000 barrels per day Petroleum Refinery with 900,000 tonnes Polypropylene Plant.

• The 435 MW Power Plant in the Refinery alone will be able to meet the total power requirement of Ibadan DisCo of 860,316 MWh covering five States including Oyo, Ogun, Osun, Kwara and Ekiti.

• Dangote Petroleum Refinery can meet 100% of the Nigerian requirement of all refined products (Gasoline, 53 million litres per day; Diesel, 34 million litres per day; Kerosene, 10 million litres per day and Aviation Jet A1, 2 million litres per day) and also have surplus of each of these products for export.

• Designed for all Nigerian Crude with flexibility to process other crudes.

• Self-sufficient Marine facility with ability for freight optimization. Largest single order of 5 SPMs anywhere in the world.

•  Diesel , Gasoline and aviation fuel from the refinery will conform to Euro V specifications.

• The refinery design complies with, EU Emission StandardEPA, European emission norms and Department of Petroleum Resources (DPR) emission / effluent norms.

• State- of- the- art technology.

• Designed to process large variety of crudes including many of the African Crudes, some of the Middle Eastern Crudes and the US Light Tight Oil.

• 65 Million Cubic Metres of Sand dredged costing approximately  300 Million Euros , using the world’s largest, the second largest and the tenth largest dredgers to elevate the height by 1.5 metres, to insure against any potential impact of increase in mean sea level due to global warming.

• Bought over 2,262 units of various equipment to enhance the local capacity for site works since even the biggest local civil contractors are unable to handle even small portions of our construction requirement.

• Bought 308 cranes to build up equipment installation capacity since the current capacity in Nigeria is extremely poor.

• Built the world’s largest granite quarry to supply coarse aggregate, stone column material, stone base, stone dust & material for break water. (10 million tonnes per year production capacity).

• Developed a port and constructed two quays with a load bearing capacity of 25 tonnes/ sq meter to bring Over Dimensional Cargoes close to the site directly.

• Constructed two more quays in the port with a capacity to handle up to Panamax vessels to export the fertiliser and the petrochemicals and two quays to handle liquid cargoes. The port will thus have 6 quays, including a Roll-on/Roll-off quay.

• In the course of the civil works, some days 700 piles were drilled daily, and the total number of piles came to 250,000.

• It has 177 tanks of 4.742 billion litre capacity.

• Total capacity loading of 2,900 per day. This number is based on tanker capacity of 33KL.

• Dangote is one of the few companies in the world executing a Petroleum Refinery and a Petrochemical complex directly as an Engineering, Procurement, and Construction (EPC) contract.  Globally, apart from three companies, no individual owner has done the complete EPC Contract for a Petroleum Refinery

• Temporary housing units on the premises can house 50,000 persons.

• The project utilised the coordination of various local and international suppliers and the coordination of multi-cultural work teams.

• Training of 900 young engineers in refinery operations outside the country. Another six Mechanical Engineers trained in the GE University in Italy. 50 Process engineers trained by Honeywell/UOP for six months; 50 Management Trainees; secondment for succession.