The Nigerian National Petroleum Corporation (NNPC) decision to invest $2.7 billion in 20 percent stake in Dangote Refinery was informed by the neccesity to ensure that the plant buy crude oil from Nigeria.
According to the Group Managing Director of the state-oil firm, Mele Kyari, prior to the move to take 20 percent in the refinery, Dangote refinery had no obligation to buy crude from Nigeria.
Kyari spoke in a presentation before the House of Representatives Committee on Finance on Wednesday, during an interactive session on the Medium Term Expenditure Framework (MTEF) in Abuja.
He said the investment in the 650,000 capacity refinery is tied to the plant buying crude oil from Nigeria, adding that without the equity, Dangote refinery could buy cheap crude from Venezuela and import it into the country.
He said that the equity stake would ensure that the country had a seat on the board of the company.
“He (Dangote) has the right to buy oil from anywhere, so you can’t force him to buy. We structured our equity participation that this refinery must buy at least 300,000 crude from us. This guarantees your market.
“Today, every country is struggling to secure market for their crude oil. This refinery does not owe us any responsibility if we don’t have this arrangement. That is why we tied our participation to the fact that this refinery must buy from us.
“This refinery is a very complex refinery; complex in our industry because it can crack any crude. So, it can buy any cheap crude from anywhere, and bring it into this country and leave you to your crude.
“We simply saw this opportunity; we said we are not going to take any government money to put into this. We are borrowing money from the AfriExim consortium to pay for our initial payment and also tied subsequent payments to him buying from our production.
“Our decision to take equity in the Dangote refinery was a very calculated and conscious decision.
“First, there is no resource-dependent country like ours anywhere and with a national oil company, will have a venture of this size and magnitude with its very clear security implications that is situated in a free trade zone. Literally, this refinery is not in this country.
“Today, we import 100 percent of our refined products into this country. You now have a venture that will produce close to 50 million litres of petroleum products in this country where energy security is an issue.
“From my personal knowledge, the U.S. keeps stock on the ground that government owns it and that government pays for it and keeps it.
“As we speak today, we don’t have any strategic storage or arrangement. So no country will allow any venture of this nature to exist without having a seat on its board.
“Secondly, this company is situated in the free trade zone. The meaning of this is that there are several incentives granted to this business.
“If you look at our investment, total investment, of about $2.7 billion, not $5 billion, the total stake of 20 percent is $2.7 billion, if you are to build 20 percent of that capacity, which will be around 130 barrels per day capacity refinery.
“It is simply impossible to build a refinery of that capacity with that amount of money. This is not just a refinery, but a refinery with a petrochemical component. So somebody has done all the ‘jaki work’ for us, and we are taking a stake in it,” the GMD said.
Kyari further stated that the decision to have a stake in the refinery was at the instance of the NNPC, adding that “Mr Dangote may not be excited with it.”
“I can confirm Mr Chairman, taking stake was at the instance of the NNPC.
“I believe up to this moment, Mr Dangote does not want us to take equity in this plant.
“This is a very informed policy decision that will guarantee security because we will have a seat—we will have right to 20 percent of the production from this facility,” Kyari added.
Reacting, the Chairman of the Committee, James Faleke said the National Assembly would consider creating a law to protect Nigeria’s assets.