Dangote Industries Limited has acquired an additional 4,000 pieces of construction equipment as part of efforts to expand its Lekki refinery in Lagos from its current design capacity of 650,000 barrels per day to 1.4 million barrels per day.
The new equipment brings the company’s construction fleet to 6,500 machines, including 330 cranes, according to the Group Vice President, Oil and Gas and Fertiliser, Devakumar Edwin.
Mr Edwin disclosed this during a briefing with journalists on Friday while speaking during a tour of the refinery in Ibeju-Lekki, Lagos.
Mr Edwin explained that Dangote initially purchased 2,563 pieces of construction equipment after some contractors, including Julius Berger, indicated that they did not have the capacity to construct the refinery’s main factory buildings.
Rather than depend entirely on foreign engineering, procurement and construction contractors, the group decided to build its own equipment fleet.
According to Mr Edwin, bringing in foreign contractors would have required shipping their equipment into Nigeria and later taking it out, with the associated costs ultimately passed on to the project.
He said the decision was also influenced by Nigeria’s infrastructure deficit, which makes it more expensive and time-consuming to mobilise specialised construction equipment for major industrial projects.
Expansion to rely on existing infrastructure
Mr Edwin said much of the infrastructure developed for the original refinery would be reused for the expansion, helping to reduce both construction costs and the time required to complete the project.
The existing facilities include a 10-million-tonne-capacity granite quarry, 82 concrete batching plants, 203 transit mixers, a private port, an oxygen and welding-gas plant and accommodation facilities for up to 50,000 workers.
He said the refinery, originally designed to process 650,000 barrels of crude oil daily, is currently operating at about 700,000 barrels per day, which is above its nameplate capacity.
Dangote rejected $2.5bn contractor fee
Mr Edwin also explained that Dangote decided to execute the expansion through its own project company after international contractors quoted fees of about 12.5 per cent of an estimated $19.5bn capital cost.
That would have amounted to roughly $2.5bn in fees for engineering and supervision.
He said Dangote rejected the arrangement and instead tasked Dangote Projects Limited with handling the detailed engineering, procurement and coordination of contractors.
Mr Edwin recalled that Dangote’s response was to rely on the principle, “Nothing is impossible.”
Refinery designed for local and export markets
According to Mr Edwin, the refinery was designed with both domestic supply and exports in mind.
He said about 44 per cent of production was initially intended to meet Nigeria’s requirements, while 56 per cent would be exported.
He added that about 95 per cent of the refinery’s output is high-value products, including petrol, diesel and aviation fuel, while the remaining five per cent is an industrial product used as carbon black feedstock.
The refinery was also designed to produce Euro 5 and Euro 6-grade petroleum products and process different African crude grades as well as United States West Texas Intermediate crude.
The planned expansion would take the Lekki refinery’s capacity to 1.4 million barrels per day.
Mr Edwin said the company would also eventually have a combined refining capacity of 2.1 million barrels per day after the expansion and the planned construction of a 700,000-barrel-per-day refinery in Kenya.
For Nigerians, the expansion is significant because the refinery’s larger production capacity could affect the volume of refined petroleum products available for domestic use and exports. However, the actual effect on pump prices and supply will depend on factors including crude availability, operating costs, market prices and domestic distribution.
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