NIGERIA – Federal Executive Council (FEC) has approved the acquisition of 20% equity stakes in Dangote Refinery, an integrated refinery project under construction, by the Nigerian National Petroleum Corporation (NNPC) for a cash consideration of US$2.76 billion.

The NNPC had earlier announced in May 2021 its intention to acquire an equity stake in Aliko Dangote’s refinery, as well as in five other refineries that are in the development phase, to promote national energy security.

Nigeria has four refineries – located in Port Harcourt, Kaduna, and Warri- with a combined installed capacity of 445,000 barrels per day compared to Dangote Petroleum Refinery, a multi-billion-dollar project with a capacity of 650,000 barrels per day.

“There is no resource-dependent country that will watch a business of this scale, which borders on energy security and has implications for fiscal security of the country, and you don’t have a say,” the Managing Director of the NNPC, Mele Kyari said.

As an objective to grow its domestic refining capacity and improve petroleum products supply from local refineries, the Nigerian Government in March 2021 approved a US$1.5 billion revamp of two NNPC-owned facilities in Port Harcourt that have the capacity to refine 210,000 barrels of crude per day.

“There is no resource-dependent country that will watch a business of this scale, which borders on energy security and has implications for fiscal security of the country, and you don’t have a say.”

Mele Kyari – Managing Director, NNPC

In the same light, the FEC in its meeting presided over by Vice President Yemi Osinbajo in Abuja approved contracts for the rehabilitation of the Warri and Kaduna refineries.

“The FEC, today, approved the award of contract for the rehabilitation of Warri and Kaduna Refineries at the combined total sum of 1.5 billion dollars– 897.67 million dollars for Warri Refinery and 586.9 million dollars for Kaduna Refinery,” said Timipre Sylva, Minister of State for Petroleum Resources.

The has NNPC had said its move to work with private companies was in line with safeguarding the country’s energy security and would not undercut plans to rehabilitate its own refineries.

The NNPC said in June it had signed term sheets with Dangote Group for the stake in its $19 billion oil refinery and is in talks with banks to borrow to buy the stake but would require government approval of the plan.

The Dangote Group has previously said NNPC and three other firms had approached it regarding a stake purchase, to be able to secure crude supply agreements.

Nigeria, Africa’s biggest crude oil exporter, imports virtually all its fuel due to moribund state refineries, which has prompted NNPC’s interest in Dangote’s oil refinery.

In March, Nigeria approved US$1.5 billion of spending on the modernisation of the Port Harcourt oil refinery and awarded a contract to Italy’s Tecnimont (MTCM.MI).

Sylva said 15% of the contract sum has been paid and work has started in Port Harcourt. He added that the Cabinet approved contract awards for the upgrade of the Warri and Kaduna refineries to Saipem SpA (SPMI.MI) and Saipem Contracting Ltd for US$1.484 billion.