Dangote Buys 4,000 More Machines for Lekki Refinery Expansion
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| Aliko Dangote (President of the Dangote Group) |
Dangote Industries Limited has purchased an additional 4,000 pieces of construction equipment to support the expansion of its Lekki refinery to 1.4 million barrels per day. The purchase lifts the company's total fleet to 6,500 machines.
Devakumar Edwin, Group Vice President for Oil and Gas and Fertiliser, announced this on Friday while briefing editors during a tour of the refinery in Ibeju-Lekki, Lagos.
Edwin explained that the company first bought 2,563 pieces of equipment after Julius Berger and other contractors said they lacked the capacity to build the refinery's main factory buildings.
“We ended up buying 2,563 pieces of equipment. We became the second largest company in the world in terms of construction equipment. Today, we are the largest because of the expansion. We have bought 4,000 more pieces of equipment; we have 6,500 pieces of construction equipment. We bought 330 cranes,” he said.
According to him, the President of the Dangote Group, Aliko Dangote, chose to buy equipment rather than hire foreign engineering, procurement and construction contractors, having determined that overseas firms would drive up project costs considerably.
“If I bring in a foreign contractor, I’ll have to ship in all his equipment, and I’ll have to ship back all his equipment, and those guys will also try to depreciate their equipment by adding it to our cost. By the end of the day, we end up paying a lot of money. So my president said, very well, let’s go and buy all the construction equipment,” he said.
Edwin recalled that Julius Berger reviewed the refinery's drawings and turned down the construction of the main process buildings. “They said, sorry, we cannot do any of your factory buildings. We don’t have the capacity,” he said.
The construction firm went on to build 43 of the roughly 127 auxiliary buildings, among them canteens, transformer rooms, control rooms and fire-fighting houses.
Edwin added that Nigeria's infrastructure deficit also influenced the decision to build an in-house equipment fleet. He noted that when Dangote built the Apapa sugar refinery in 1998, Nigeria had only two large cranes, each with a 150-tonne capacity.
For the Lekki project, the company hired one of only two 5,000-tonne cranes in the world and bought 330 cranes of its own. “When we are operating in a country with an infrastructure deficit, it takes a lot of time to plan, a lot of money to invest in all these things that industries do not require,” he stated.
He said much of the infrastructure built for the refinery's first phase will be reused for the expansion, cutting both cost and construction time.
He listed the existing facilities as a granite quarry with a 10 million-tonne capacity, 82 concrete batching plants, 203 transit mixers, a private port, an oxygen and welding-gas plant, and accommodation for 50,000 workers.
Edwin said the refinery, originally designed to process 650,000 barrels of crude oil per day, is already running above its nameplate capacity. “We have designed the refinery for 650,000, but we are now operating at 700,000. That is over 50,000 barrels per day above the design capacity. So the production volumes are even higher,” Edwin said.
On the choice to deliver the expansion through Dangote's own project company, Edwin said international contractors had quoted fees of about 12.5 per cent of an estimated $19.5bn capital cost.
He said those fees would have come to about $2.5bn, and Dangote rejected the arrangement. “I said, it’s madness to go and give two and a half billion dollars to a contractor as just a fee for designing and supervising,” Edwin said.
He said Dangote responded, “Edwin, have you forgotten the plaque on my table?” Edwin said the plaque bears the inscription, ‘Nothing is impossible’.
“That is how we took up the challenge, and a Nigerian company, Dangote Projects Limited, designed the detailed engineering, went for the tenders, bought every single item, even the nuts and bolts, we bought directly, and engaged contractors, and we constructed the refinery,” he said.
Edwin further noted that the refinery remains the world's largest single-train petroleum refinery, as the biggest facility before it had a capacity of 430,000 barrels per day.
He said the original design balanced import substitution with exports: 44 per cent of output would cover Nigeria's requirements, while 56 per cent was earmarked for export.
“95 per cent of our production is high value, either petrol or diesel or jet fuel. Only five per cent is lower, and even that five per cent is actually an industrial product, carbon black feedstock,” he explained.
He added that the refinery was designed to produce Euro 5 and Euro 6-grade products and to process a broad range of African crude grades, as well as United States West Texas Intermediate crude.
Edwin said Dangote's refining capacity will reach 2.1 mbpd after the expansion and the completion of its planned 700,000 bpd refinery in Kenya.
