Dangote acquires 4,000 machines for refinery expansion

Dangote Industries Limited has acquired an additional 4,000 pieces of construction equipment for the expansion of its Lekki refinery to 1.4 million barrels per day, bringing its fleet to 6,500 machines.

The Group Vice President, Oil and Gas and Fertiliser, Devakumar Edwin, disclosed this Friday while briefing editors during a tour of the refinery in Ibeju-Lekki, Lagos.

Edwin said the company initially acquired 2,563 pieces of equipment after Julius Berger and other contractors indicated that they lacked the capacity to construct the main factory buildings of the refinery.

“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.

He explained that the decision to acquire the equipment rather than engage foreign engineering, procurement and construction contractors was taken by the President of the Dangote Group, Aliko Dangote, after the company found that hiring overseas contractors would significantly increase the project cost.

“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, after reviewing the refinery’s drawings, declined to undertake 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.

He said the construction firm subsequently handled 43 of about 127 auxiliary buildings, including canteens, transformer rooms, control rooms and fire-fighting houses.

According to Edwin, the decision to build the company’s own construction equipment fleet was also driven by Nigeria’s infrastructure deficit. He recalled that when Dangote built the Apapa sugar refinery in 1998, there were only two large cranes in Nigeria, each with a 150-tonne capacity.

For the Lekki refinery project, the company hired one of only two 5,000-tonne cranes in the world, while also purchasing 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.

Edwin said much of the infrastructure developed for the first phase of the refinery would also be deployed for the expansion, reducing the cost and time required for the project.

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He listed the existing infrastructure to include 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 facilities for 50,000 workers.

He said the refinery, originally designed to process 650,000 barrels of crude oil per day, is already operating 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 decision to execute the expansion using 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 the proposed fees would have amounted to about $2.5bn, prompting Dangote to reject 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 quoted Dangote as replying, “Edwin, have you forgotten the plaque on my table?” According to Edwin, the plaque carries 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 added that the refinery remains the world’s largest single-train petroleum refinery, noting that the largest facility before it had a capacity of 430,000 barrels per day.

He said the original refinery design was based on both import substitution and exports, with 44 per cent of production sufficient to meet Nigeria’s requirement and 56 per cent 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 process a wide range of African crude grades as well as United States West Texas Intermediate crude.

According to Edwin, Dangote will boast 2.1 mbpd refining capacity after the expansion and the construction of its 700,000 bpd refinery in Kenya.