Nigeria’s new Dangote petroleum refinery is Africa’s largest – it is going to produce 650,000 barrels a day, giving it the potential to handle the nation’s vitality provide disaster.
Owned by Nigerian industrialist and Africa’s richest man, Aliko Dangote, the refinery is predicted to spice up home refining capability, getting rid of the present consumption shortfall. It is going to additionally scale back import dependency and stimulate financial development.
It’s the first privately owned crude oil refinery in Nigeria. Nigeria’s present refineries, tormented by operational inefficiencies below authorities management, have failed to fulfill the rising demand for petroleum merchandise. Substantial imports have turn out to be obligatory.
Nigeria presently imports greater than 80 per cent of its refined petroleum merchandise. The nation is the largest importer of refined petroleum merchandise in Africa. Native manufacturing will subsequently massively minimize the nation’s import invoice.
In 2021, Nigeria spent US$11.3 billion on importing refined petroleum merchandise.
Nigeria subsidises the pump worth of petrol. For the reason that nation imports the majority of its refined petroleum merchandise, official purpose for sustaining petrol subsidies was to minimise the impression of rising international oil costs on Nigerians.
In keeping with the brand new company entity solely licensed to function Nigeria’s petroleum business, NNPC Limited, Nigeria spent $10 billion on gas subsidies in 2022 and is predicted to spend $7.5 billion on gas subsidies by mid-2023.
This represents about 24 per cent of Nigeria’s 2022 budget and is an unsustainable drag on public funds. This cash can now doubtlessly be saved with Dangote refinery plugging the availability shortfall.
In my previous research, I’ve discovered that there’s a hyperlink between Nigeria’s crude oil export dependency and its weak native refining capability in addition to the subsidy. That is additionally the case with Mexico, which exports its crude overseas for processing.
Primarily based on my expertise within the sector, I set out the 4 areas the place the Dangote refinery is predicted to make an impression on Nigeria’s petroleum sector and, by extension, the Nigerian economic system.
Diminished oil import dependence
Essentially the most notable impression of Dangote refinery would be the improve in native refinery capability, which can scale back imports.
Dangote refinery is predicted to assist Nigeria meet 100 per cent of it’s refined petroleum product wants (gasoline, 72 million litres per day; diesel, 34 million litres per day; kerosene, 10 million litres per day and aviation jet, 2 million litres per day), with surplus merchandise for the export market.
The refined petroleum output from the refinery together with different refineries in Nigeria is predicted to fulfill the shortfall of the estimated day by day consumption of 72 million litres of petrol.
The nation has confronted several fuel shortages previously, which have induced prices to surge for transport and fundamental commodities.
Recent fuel shortages have been blamed on the Russia-Ukraine warfare. The value of imported gas rose greater than 100 per cent. Importers operated at a loss as a result of worth ceilings set by the federal government.
In addition to eliminating import dependency, the Dangote refinery can doubtlessly scale back Nigeria’s crude oil export dependency as extra crude oil shall be refined domestically.
Refining crude oil domestically will allow the nation pay for the refined product in naira which can save scarce overseas change and generate income in exported refined petroleum merchandise.
Assist for allied industries
The institution of the refinery can be probably to assist scale back the price of manufacturing for industries that rely on petroleum products corresponding to diesel to energy their operations. In flip, this could improve their competitiveness within the international market whereas selling native business capabilities.
The refinery might additionally create an setting for allied industries to emerge in and round it. As an example, companies in transport, housing and telecommunications will profit from the development and operations of the refinery.
And the refinery ought to create jobs and entrepreneurship alternatives.
Whereas below development, the refinery employed about 40,000 workers – 29,000 Nigerians and 11,000 foreigners.
The roles had been in engineering, development, manufacturing and operations, amongst different areas.
In full operation, the refinery, in response to media stories, is predicted to create over 250,000 direct and oblique jobs. I imagine it is a truthful estimate.
The nation’s present unemployment charge is predicted to succeed in 40.6 per cent in 2023.
Doable improve in carbon footprint
The operation of Dangote refinery raises considerations about its potential impression on Nigeria’s web zero emission objectives. Internet zero is a perfect state the place the quantity of greenhouse gasoline emissions produced and greenhouse gasoline emissions taken out of the environment is balanced.
Decarbonisation efforts are required for international locations to attain web zero however the path and time may differ as international locations could wish to take a gas-led strategy to transition to renewable vitality.
On the COP26 local weather change assembly in 2021, President Muhammadu Buhari committed to net-zero emissions by 2060. That is to guard Nigeria’s setting and ecosystem from the impression of local weather change and scale back the nation’s greenhouse gasoline emissions.
Nigeria has an Energy Transition Plan to get nearer to a extra sustainable economic system. The plan assumes larger use of pure gasoline as a “transition fuel”.
Oil refineries contribute about 4 per cent of the worldwide carbon emissions.
The Dangote refinery complies with World Financial institution, US, European and Nigerian norms for emissions and effluents.
Conclusion
The Dangote refinery is a major step in direction of self-sufficiency in Nigeria’s vitality sector.
Nonetheless, the refinery continues to be reliant on fossil fuels, and it isn’t a long run resolution to Nigeria’s vitality wants.
Nigeria has important renewable energy potential, together with photo voltaic and wind energy.
Renewable vitality may be harnessed to fulfill Nigeria’s vitality wants in a sustainable method. Subsequently, Dangote refinery needs to be seen as a stepping stone in direction of a transition to cleaner vitality sources within the medium time period.
It’s important that Nigeria continues to spend money on renewable vitality and discover methods to scale back its reliance on fossil fuels to attain its web zero emissions purpose.
Nnaemeka Vincent Emodi, Analysis Fellow, The University of Queensland
This text is republished from The Conversation below a Inventive Commons license. Learn the original article.
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