The Director, Stakeholder Relations and Corporate Communications, Dangote Group and the President, Manufacturers Association of Nigeria, Engr. Mansur Ahmed, in this interview, speaks on the level of progress of the Dangote refinery and how the Group plans to overcome forex challenges, source crude for the refinery, escape pipeline vandalism and transform Nigeria to a net exporter of refined petroleum products when the refinery comes on stream.
Could you give us the update on the Dangote refinery, petrochemical and fertilizer project?
The project currently is under development as we have virtually completed the engineering design. We are now in the process of preparing the ground. It is a very huge complex of about 250,000 hectares there. As you know, it is in the Lekki Free Zone basically on the coastal waters so there is a lot of dredging and clearing that needs to be done. We are clearing the forest, filling up the land and getting it ready for the equipment and machinery that will come. We are also in the process of procuring the various machinery and equipment and getting them to site. We have already started erection of the fertilizer plant, which is part of the complex. We believe that by the end of next year the fertilizer plant should be in operation. The refinery will take longer because it is a much bigger complex. The capacity of the refinery is 650,000 barrels per day. It is about one and half times the capacity of all the Nigerian refineries that exist today
How many million litres of premium motor spirit (PMS) or petrol will the 650,000 barrels yield?
The output will depend on the crude you use but the output of all the products will be more than sufficient: petrol, kerosene and diesel will be produced in sufficient quantity to meet all the requirements of the domestic economy and to allow for export. This is why we are very proud that by the time this plant is ready, Nigeria will be transformed from an importing country to an exporting country. That plant itself is the largest single refinery plant anywhere in the world.
In addition to the refinery, we are also going to produce some petrochemical products from the same complex. These are polyethylene and polypropylene.
Looking at the complexity of the industry and the targets you want to achieve, would one be right to say that you are over-ambitious? Don’t you lack the capacity?
You would be wrong, why don’t we have the capacity? We have the capacity to be the largest producer of cement in Africa. Today we are producing 29,000MT of cement per annum in Nigeria, which is over 60 percent of the total cement capacity in Nigeria. We are the largest sugar refinery and our plant in Apapa is the largest sugar refining plant in the world. If we can do it in sugar and cement, why can’t we do in it petroleum products?
How prepared are you in terms of the human capacity to drive the project?
Today, human capacity is mobile. If you want the best trained refiners in the world you can bring them, and we are open to bringing the best people we can. Apart from that, we are also in the process of developing and training our own people. Last Sunday, we sent about 50 young Nigerians to train as refining engineers and technologists. This is the first batch and our plan is that as the plant is progressing we will send more and more until we have all the skilled people that we require. They will not just learn in classes they will also deployed in refineries such as ours in India so they become not just qualified in terms of the knowledge but competent in terms of skills and experiences.
You need more than $14bn dollars to see through these projects. How are you working around the forex challenges?
The total investments in all the projects-the refinery, petrochemical, fertilizer and gas pipelines are currently about $14bn. However, the refinery itself is only a part of this. As with everybody else we apply to the CBN. We apply to get as much as we can from the CBN but where we do not have enough to meet any particular transaction we can also get it from other sources. The financing includes a number of other bank and other investment facilities like loans from institutions both Nigerian and foreign, some of these in foreign exchange. That is how we will generate the forex to meet our requirement. You are absolutely right that there are very serious challenges. We are not getting as much as we can but challenges are part of every opportunity. We have other challenges beside the forex situation but we do not regard it as something that will impede our progress or discourage us.
Have you received any form of waiver from the government for the importation of some of the equipment for the projects?
Whenever there is a policy incentive and we believe we are entitled to that policy incentive, we apply. Let me give you an example. The federal government says if you are investing in any project that is supposed to help develop gas in this country you can apply for some custom duty waiver. Where we see that, we apply. Because the fertilizer plant is a gas related-project, we have applied for custom waiver regarding the fertilizer plant. But we do not and have not applied for any special waiver to ourselves. This is very important to highlight that as a rule we do not apply for a waiver only for ourselves.
As a pioneer investor in a massive refinery project as this, has the National Investment Promotion Council considered you for any form of pioneer status?
There are several other incentives we have applied for. Where we see a policy-approved incentive which is available to anybody who qualifies for it, we apply. If you are in business, incentive is like a tax allowance, it is to encourage you to do what you are doing.
How do you plan to overcome the problem of pipeline vandalism? We understand Dangote has an oil block; do you plan to source your crude from the field?
We are involved in oil exploration and we expect that we will have some of our own crude that we can use but the refinery is designed to use different types of crude so that if we don’t have enough Nigerian crude we can also import. On how we plan to escape vandalism, the arrangement we are making is that our crude is going to come through a subsea pipeline. The chances of anybody going down to vandalize are limited. We are going to even have our own field lay pipelines that will deliver the crude and if we are importing it will come from major vessels that will come close to the refinery and pump the crude. We are not unconscious of this issue.
If perhaps the Nigerian government puts up the state-owned refineries for sale again, will Dangote still be interested in buying?
This is speculative! If and when the governments put those refineries up for sale, which from all indications they are not going to do soon, we will look at the situation and see if it of interest to us and we will bid. We have bid before; we bought two of them but the transaction was reversed. So, we do not speculate at this stage, we will look at the situation when the opportunity arises and this is pure business. The real issue is that we will not speculate on any federal government-owned refineries.
The participation of government in fixing fuel price has discouraged investors who have refinery licences. How does Dangote refinery intend to cope with the government still controlling the prices of petroleum products?
One would prefer if it was deregulated so that we know that we are playing in the open market. The key issue is that if I buy crude whether from Nigeria or anybody, I buy at an international price. If I produce product and want to sell, I should sell that product at an international price. So, I would not be affected by the decision of local pricing, it is on that concept that we went into refining. We expect that we would buy our input, especially crude on an international market price and that when we produce products we will sell those products at an international price. The refining industry is a global industry, if you use those international benchmarks you shouldn’t really worry about price.
It is about time Nigeria completely deregulated the downstream industry. The kind of reason that has compelled government to fix petroleum product prices has not been tenable. If it is said it is done because of the ordinary people when you do the study you do not see the ordinary people benefit from it, it is a few people who benefit. This is the best time to deregulate.
Part of the current reforms has been on the table for many years. The current reform effort is to remove the impediments to the past that have impeded the value Nigerians drive from it and to make the industry competitive worldwide. Third is to open up the industry so that Nigerians can also participate. Some of them are regulatory; like the PIB some are structural, some are intended to increase the efficiency of the industry.
My understanding of the reforms announced by the Petroleum Minister (state) is to break up the behemoth NNPC to a semi autonomous company each with a clear pattern and a clear flow of resources going in and out to ensure there are no leakages.
Whether this will achieve the intended effectively or not? In some areas, I have some concerns. It depends to a largest extent. We haven’t seen the full implementation of the reforms so it would be unfair to make any judgment. But in my view, unless those independent units are clearly self-accounting and one can see whether these units are actually making profit or loss. If it is making profit and we can see it, then the reform will be valuable, but if on the other hand we are putting them as independent units but still under one umbrella then it may probably not make the purpose.
Away from petroleum, we have seen dramatic changes in the cement industry but till now your interventions in the sugar sector are not visible. There is the target for Nigeria to be self-sufficient in sugar. What are the challenges there?
We have been able to influence the cement side both in terms of supply and in terms of pricing because we are fully integrated. We operate from the quarry to the cement bag so we are in control of the full value chain. In sugar we are not yet, we import raw sugar, refine it and then sell as dry sugar. Because we are only refining means that we do not have full control over the price behind the raw sugar.
Second, the competition in the market is intense but we are changing it. Already we have a small sugar integrated plant in Adamawa. However, part of our plan is expand the sugar plantation from the current 6000 hectares to 150000 hectares that will help us produce sugar, at least, about 1m tons per annum that will enable us also have the kind of impact that we can have in the sugar market. We are in the process of negotiating with other state governments principally for now, Kebbi state. We have developed new acreages in those areas. I am confident that in the next four years we should be able to see change in the sugar industry as well.
There has been a sustained advocacy for the use of cement in road construction. Shouldn’t we be concerned about the quality and cost of this new technology versa vice? What you think are the disadvantages are actually the advantages.
Based on the current cost of imported asphalt and given the high rate of foreign exchange and given the fact that we are bringing cement prices down, we have established beyond reasonable doubt that for the same length of road and for the same terrain, a concrete road today will cost anything between 15 and 20 percent lower than the equivalent cost of an asphalt road.
Concrete road is less maintenance-intensive than asphalt road. Third, with limited maintenance, concrete road will last between 25 and 35 years. An asphalt road of the same standard will not last more than 10 to 15 years. It is just that in this country we are so used to the normal black asphalt road. But we have been selling this and I can assure you that in the next two years you will be surprised there will be many concrete roads in this country.