LAGOS / LONDON, Sept. 15 (Reuters) – Africa’s richest man Aliko Dangote is in talks with some of the world’s largest oil traders to help finance his mega-refinery project at the outside Nigeria’s Lagos Mall, sources familiar with the matter said, though his company has denied the talks.
The 650,000 bpd refinery, when completed, will be the largest plant on the continent and will redesign major crude and fuel trade flows in the Atlantic Basin.
Despite being Africa’s largest oil producer and exporter, the country relies almost entirely on imported fuel after allowing its significant refining capacity, 445,000 barrels per day, to deteriorate for several decades.
Many past and current Nigerian officials, including President Muhammadu Buhari, have announced plans to renovate them, but political will has been lacking.
The Natural Resources Governance Institute, a nonprofit political think tank, has previously indicated that dying refineries are a key hotbed of corruption and oil waste in the country.
Struck by the economic consequences of the COVID-19 pandemic and skyrocketing construction costs, Dangote needs an injection of cash.
Nigerian state oil company NNPC has agreed to buy a 20% stake in the refinery for around $ 2.8 billion, but Dangote is looking for outside liquidity. read more Mele Kyari, director of NNPC, said a process was underway to raise $ 1 billion from Afreximbank to finance part of its stake.
The billionaire held talks just a month ago with executives of the world’s two largest oil traders – Trafigura and Vitol, three sources directly familiar with the matter said.
Dangote management has denied the talks.
“The company is not in talks with the aforementioned oil traders to seek a loan to finance our project,” management of Dangote Industries Ltd said in a statement.
Trafigura and Vitol declined to comment.
Two separate sources with direct knowledge of the matter said the option of raising an additional $ 500 million from a trading house or consortium was under consideration.
Details of a potential loan from a trading company have not been finalized, but the trader may be given a long-term contract to supply crude and receive shipments of refined products as repayment.
The refinery has been delayed for several years, and the cost has climbed to $ 19 billion from Dangote’s earlier estimate of $ 12 billion to $ 14 billion. Construction was also delayed due to outbreaks of COVID-19 among site workers and delays in obtaining materials, two other sources said.
Many industry sources don’t expect any products until the second half of next year.
Swiss traders like Vitol as well as Nigerian companies have cashed in on gas-strapped Nigeria for years by providing mega-tenders and participating in lucrative crude oil-for-fuel swap deals for over. of a decade.
Grabbing fuel from Dangote will give the trader a stranglehold on a key set of new oil streams. Nigeria’s new petroleum bill, approved last month after nearly 20 years of political wrangling, added fuel import license requirements that experts say will give Dangote an effective monopoly. Read more
Under the new laws, the regulator will prioritize local refiners for import licenses and volumes would be based on production capacity or market share.
While Nigeria will theoretically remain open to international trading houses, a partnership with Dangote would be the only way to secure a foothold in Africa’s largest economy.
Reporting by Libby George in Lagos, Julia Payne and Dmitry Zhdannikov in London Writing by Julia Payne Editing by David Evans and Mark Potter
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