BY ADNAN MUKHTAR
There are a number of licences and approvals required for a refinery to start in Nigeria. Those who are not familiar with the matter may not know this and don’t care to know.
The recent brouhaha on the Dangote refinery and the regulators like the NMDPRA and the NNPCL have opened the eyes of many Nigerians about the oil and gas sector and the requirements for a refinery to start full operation.
Let me start with the three main ones which are: Licence to establish (LtE), approval to construct (AtC) and licence to operate (LtO).
Dangote has qualified for the two licenses but doesn’t have one which is the LTO, the Licence to start full operation.
But Nigerians will ask this question because of the lack of awareness of regulatory practice and the downstream business. Wrong interpretations of the NMDPRA CEO’s words were used to misinform or even disinform the general public on this matter.
This is why I decided to pen this for the benefit of all Nigerians who are not aware of the technicalities of a refinery’s operation.
Why would you say Dangote doesn’t have a licence to operate when we all know it is operating? This is a question that many Nigerians ask.
Dangote doesn’t have a LtO yet, he knows this and many people around him. For instance, when Nigeria was sharing information with Opec in March/April, it didn’t report the Dangote refinery as operational because Dangote doesn’t have a lot even though it started operations in January.
Ideally, every single thing in a refinery will be tested for (1) operability and (2) safety before granting of that final licence to operate (LtO).
But, given the size and complexity of Dangote and given the economic pressures of our energy crisis, he was allowed to operate.
it was decided that granting an LtO to Dangote be split into phases with startup approval granted for the units in each phase, up until the LtO grant after the final phase approval.
That process is about 45% complete, with most secondary and demulphurisation units yet to start.
Dangote’s crude distillation unit was the main unit in the first phase and that started up in January, producing naphtha, jet, gasoline, diesel, straight-run fuel oil and other fuel oils.
The January start was at a very low run rate, it didn’t cross 80,000bpd until around March. So, that production flowing into the refinery’s storage doesn’t hit tank top and the business can start making money to repay debts and finance ops, it was granted approval to export, which started in March, and a waiver to sell diesel to domestic market, which started in April.
Dangote needed that waiver to sell diesel into Nigeria partly because the sulphur content in their diesel is still very high, in the range between 650ppm and 1,200ppm. Remember that the refinery has yet to start its desulphurisation units.
But note that in March, NMDPRA started enforcing a 200ppm maximum sulphur content on importers. So, around the same time, Dangote got a waiver to sell diesel that could be above 1,000ppm, importers were not allowed to bring in anything higher than 200ppm. Is the FG against Dangote with this?
Note that between 2003 when Nigeria deregulated its diesel market & recently, diesel imported from Europe could be 200 times more toxic than is acceptable in Europe and 50 times more toxic than diesel refined from stolen crude in the Niger Delta using rudimentary equipment.
European dirty diesel was a problem not only in Nigeria but in the entire region and much of the continent. Nigeria has therefore been part of regional efforts, formally since 2016, to reduce the sulphur levels in petroleum products.
ECOWAS target is now 50ppm maximum by 2025.
There were also efforts in Europe to stop the export of dirty diesel from there to Africa, especially from the Amsterdam-Rotterdam-Antwerp hub, first by the Dutch state then the Belgian state.
Nigeria is a signatory to the 2020 Ecowas declaration that adopted the 50ppm maximum sulphur content limit and roadmap.
The Petroleum Industry Act then made that target and the roadmap for reaching it part of our laws in 2021.
As part of that roadmap process, an exemption was provided for African refineries, waivers for Ecowas refineries, until the end of 2024, after which refineries in Ivory Coast, Ghana, Niger, Nigeria and Senegal must comply with the 50ppm limit. Something Dangote has benefitted.
Note that the higher the ppm, the dirtier the diesel the cheaper it ought to be.
But Dangote’s dirty diesel was being sold at the same prices as cleaner diesel received through imports, a commercial benefit to Dangote.
Recall also, that forex rates were exceptionally high in late February/early March. But as the pressure on the naira reduced, Dangote passed on some of the savings to consumers but didn’t explain the whole story. As the naira has weakened again, Dangote’s diesel prices have moved up
But, as a proper Oliver Twist, Dangote wants more.
All the people whose silence has allowed Dangote to truck in half-truths are now speaking up but the lack of transparency and the preceding silence means recent statements are generating more heat than light.
Adnan is a public affairs analyst and can be reached via adnanmukhtaradam@gmail.com
