Aliko Dangote’s huge Lagos oil refinery pits economic imperatives against climate concerns.
by Azu Ishiekwene for bird story agency
When Africa’s richest man, Aliko Dangote, was dealt a bad hand in a failed transaction, he didn’t give up. Instead – slowly, steadily – he exacted his revenge. His reward? Not a pound of flesh, but millions of barrels of liquid black gold.
In 2007 Bluestar, a Dangote-led consortium paid US$721 million for the moribund Port Harcourt and Kaduna Refineries. Months later President Umaru Musa Yar’Adua’s government decided to reverse the sale. The decision was driven by a labour strike and labour groups’ insistence that the refineries (which were only producing at about 20% of their capacity at the time) were undervalued and underpriced.
Dangote walked away bruised but unbowed. Six years later he announced plans to build a private refinery in Lagos, with a capacity of 650,000 barrels per day – over 200,000 bpd more than the combined capacity of Nigeria’s four state refineries. On completion, it will span 2,500 hectares. After a series of delays, Dangote’s refinery will reportedly start production towards the end of 2022. But there may be another spanner in the works for his long-term goals: global objections to the impact of fossil fuels.
The Nigerian billionaire entrepreneur was once outspoken on global warming and its impact on Africa.
“All over the world, nature is reacting. We are having extreme weather conditions…as managers of the city, our responsibility is to share knowledge with our people to prepare for the worst and hope for the best,” he told guests at a fundraiser hosted by the Lagos State government for victims of a major flood disaster in 2011.
But that was before he started building his refinery.
For Nigeria and much of Africa, a huge endowment in energy sources - renewable and otherwise - remains considerably underutilized. The choice facing Africa, its industrialists and forward-thinking governments, seems to swing between aggressively reducing emissions, already among the lowest in the world, and expanding industrial processes required to meet rising energy demand - without much space for a middle ground.
Apart from an estimated 250,000 direct and indirect jobs that the refinery would create, the refinery is also expected to generate other job opportunities and substantially reduce transportation costs, imported inflation and Nigeria's heavy reliance on dollar-denominated imports. These are facts Dangote loves to share in a country with a 33% unemployment rate.
Dangote Group insists it’s not in denial about the environmental risks inherent in its new refinery.
Group Executive Director, Strategy, Capital Projects and Portfolio Development, Devakumar G. Edwin, said four years ago that the group was dedicated to producing “efficient and clean fuels by investing in processes that meet European standards of gasoline”.
On the same occasion he underscored why the refinery was to be built: “Primarily, Nigeria exports raw materials and imports finished products. When you import the finished product back, you are essentially importing poverty into the country.”
Nigeria imports between 80 and 90% of all domestically consumed petroleum products. According to the Observatory of Economic Complexity (OEC), Nigeria imported US$7.75 billion in refined petroleum products, in 2020, becoming the 17th largest importer of the products in the world.
Edwin continued: “We have always focused on import substitution. It’s what we are doing in sugar and what we’ve done in cement. So, we decided to adopt the same strategy for petroleum refining.”
Imports may also harm the environment. Stakeholder Democracy Network, an NGO, reported on its website that the quality of imported fuel could also make the air more toxic, along with other environmental concerns.
On paper, Nigeria recognises the urgency of implementing sustainable energy solutions. Its Energy Transition Plan is a green playbook for achieving carbon neutrality by 2060. It comes on the heels of the Petroleum Industry Act, which was finally ratified in 2021. The law is supposed to introduce stability, transparency and accountability to an industry that has long resisted reform.
The Energy Transition Plan anticipates a scenario in which increased investment in the sector would lead to an uptake in the use of gas as a “transition fuel” and also help accelerate the move toward decarbonisation.
Nigeria, like many commodity-rich countries on the continent, is at a crossroads. Which way forward? Is there perhaps a bridge?
Maybe. But that does not appear to be Dangote’s immediate preoccupation: Reuters quoted him as saying he is focused on starting production at the end of the third quarter of 2022 and reaching full capacity by early 2023.
The refinery will bring massive opportunities and efficiencies that will have an immediate impact on the climate, most obviously, through reduced transportation emissions. But where Nigeria - and the world - might once simply have rejoiced, the picture is now more complex.
About fifteen years on from Dangote’s Bluestar misery, the mood in official circles has changed. Last year, the government gave state oil firm NNPC Limited approval to buy a 20% stake in Dangote Refinery, valued at $2.76 billion, indicating a significantly more accommodating attitude from government.
And whatever the world may be saying about fossil fuels and carbon footprints, hundreds of thousands of unemployed Nigerians cannot wait for the relief that the commencement of the refinery promises. As Kudirat Oyefeso, a trader in Ajah, Lagos, about eight kilometres from the site of Dangote Refinery said: “It is the person who is alive and has something to do that can worry about climate change.”
OpEd: Dangote’s Lagos refinery pits climate concerns against economic imperatives [Graphics: Hope Mukami]
Ishiekwene is Editor-In-Chief of LEADERSHIP, Abuja, Nigeria
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