THE WAY FORWARD WITH CRUDE OIL
while you should know the state of things and what you stand to gain.
If you are a Nigerian, you probably would have heard of crude oil before, LOL.
If you keep up with the runs of things in the country, then, you would have heard of the Dangote refinery and how it has been gulping lots of dollars. Well, That isn’t really what I want to let you know,
This is it; You have to understand that Dangote Refineries is classified as critical national infrastructure (CNI): ‘‘These are institutions, bodies or structures that provide essential goods and services forming the backbone of an economy.’’
Each barrel of crude has 159 litres that produces 170 litres worth of derivatives after the hydrocarbons are heated and seperated through different processes. Here are the derivatives of crude:
43%: Gasoline (73 litres)
23%: Automotive Gasoline Oil or Diesel (40 litres)9%: Jet A1 (15.5litres)
5%: Coke or Pepcoke (8.5litres)
4%: Heavy fuel Oil (6.8litres)
4%: Still gas (6.8litres)
3%: Liquefied Refinery Gas (5.1litres)
3%: Asphalt (5.1litres)
2%: Petrochemical feedstock (4.2litres)
2%: Lubricants (3.4litres)
1%: Kerosene (1.7litres)
Department of Petroleum Resources(DPR) says Nigerians consume 38.2m litres of fuel daily, If you run the numbers at 230 per litre landing cost for the independent petroleum marketers association of Nigeria, IPMAN spends approximately 8.7bn naira daily or 3.1trillion naira p.a.
Now the NNPC has to step in to subsidize the landing cost by paying the marketers 75 naira per litre of petrol imported. This brings the bill to 2.8bn per day or 1trillion per year for making sure that you get petrol at 165 per litre.
Nigerians consume 12m litres of diesel dailyand 23.3m litres of Kerosene daily. The government has to apply the same model to subsidize to IPMAN for AGO and Kerosene
We export the crude and import only PMS, AGO & Kerosene. All the other derivatives that constitutes 23% of the derivatives are lost to the refineries abroad through smart companies given the Oil swap deal to take out crude oil and import these major components we use daily.
For example, In 2020, Nigerian construction companies spent 310bn Importing Asphalt to use as bitumen binders for roads. The World Bank estimates that the 135 thousand km of roads Nigeria needs requires between $89-112bn worth of asphalt to construct.
Dangote Refineries is going to be producing 3.3m litres of bitumen daily per 650k barrelsDangote Refineries is going to be producing 47.4m litres of fuel per day given the 43% of 170 litres that a barrel of crude oil gives as derivative. This means Nigerians are consuming 88% of the fuel he refines daily, that doesn’t needShipping, Cost, Insurance & Freight, impairment premiums from the risk of handling, port charges and clearing costs. Let me talk about Petrochemical feedstock that produces Urea and Polypropylene and Polyethylene crystals, that are raw materials for fertilizer and packaging bagsBefore he started, Notore Chemicals was the only major in this field. Bagco (a subsidiary of flour Mills) says the Monopoly of Notore is responsible for the exhorbitant prices of crystals for bag making, that in turn affects cost to income ratio of FMCGs.There are other derivatives like Still gas, Heavy fuel Oil (IFO 180 and 380 used for big boats and ships), there's Pepcoke used for making steel and aluminium, of which Nigerians imported #887bn worth of in 2020.
Dangote is going to save Nigeria at least $10bn worth of imports on annual basis from companies backwardly integrating from him. He’s also going to earn another $5bn worth of FX dollars exporting to other countries of which he’s already started for petrochemicals.
The CBN and NNPC has all these data before them,And this is why it decided that for a company that can bring in that much revenue and produce more petroleum derivatives than we are importing daily, to avoid Monopoly, it’s best we take a stake and secure a board seat.
That way it can make decisions on where the FX dollars are sent to. If you leave it to Alhaji, he will allow Carlyle that’s currently setting up his family office to move it to New York. But the FX he earns per annum can solve the $110m per week of allocation the CBN was giving to the BDC’s.
What ordinary citizens stands to gain will be massive reduction in fuel prices.
Also, The fuel scarcity would be permanently solved while also bringing little stability to the economy. it will also massively helps in job creation.
Lastly, Nigeria will export more.
For all it stands to be, We stand a lot to gain from the success of this refinery than its failure.