The Group Managing Director of the Nigeria National Petroleum Corporation (NNPC) Mele Kyari has said the decision to acquire 20 percent equity from Dangote refinery was a strategic business decision that will ultimately benefit the nation.
Kyari, who spoke while responding to questions from members of the House of Representatives committee on Finance said the participation will guarantee that the company will buy about 300,000 barrel per ay from Nigeria.
According to him, there is nothing that says Dangote Refinery must buy crude from Nigeria, adding that they can decide to take oil from any part of the world.
He also said that the participation of the NNPC in Dangote refinery has not foreclosed the rehabilitation of local refineries, stressing NNPC’s equity in the refinery is not being paid for by government.
According to him: “Our decision to take equity in the Dangote Refinery was a very calculated and conscious decision.
“First, there is no country (resource dependent country like ours) anywhere with a national oil company that 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 literally 100 per cent of our petroleum products into this country. You now have a venture that would produce close to 50 million litres of petroleum products in this country; when energy security is an issue in almost every country, including the United States of America.
“We have personal knowledge that in the USA, they keep stock of petroleum products on the ground that government owns, pays for it and keeps it. As we speak today, we don’t have any strategic storage arrangement.
“So, no country will allow any venture of this nature to exist without having a seat on the board of a company like this.
“Secondly, this company is situated in a free trade zone. The meaning of this is that there are several incentives granted to this business. If you look at our total investment – we have not closed yet – about $2.7bn for 20 per cent stake.
“If you are to build 20 per cent of that capacity, which will be around 130,000 barrels per day, it will be impossible to build a simple refinery of that capacity with that amount of money.
“This refinery is not just a refinery. It is a refinery with an attachment of a petrochemical company. So, somebody has done all. Let me use the Nigerian parlance – the Jackie work for all of us and we are taking interest in it.
“I can confirm that taking stake is at the instance of the NNPC. I believe very strongly, up till this moment, that Mr Dangote does not want us to take equity in this plant.
“This is a very informed policy decision that, first will guarantee security of energy because we would have a seat (on its board) and we would have the right to 20 per cent of the production from this facility.
“Secondly, he has the option of buying his crude from anywhere. So, you cannot force him to buy crude from Nigeria. We structured our equity participation on the basis of the fact that this refinery must buy at least 300,000 barrels per day of our production into this refinery. This guarantees your market.
“Today, every country is struggling to secure market for their crude oil and this refinery does not owe us any responsibility if we don’t have such arrangement. That is why we tied our participation to the fact that this refinery must buy crude from us.
“This refinery is a very complex refinery – complex in our industry means that it can crack any crude. So, he can buy any cheap crude from anywhere and bring it into this country, and you will be left with your crude oil production in this country.
“We simply saw an opportunity. First of all, we were not going to put any government money into this, we are borrowing money from an AFREXIM consortium to make our initial payment and tie the subsequent payment to his buying crude oil from our production.
“We are growing our own company, NPDC, to a 500,000-barrel-per-day capacity but we have no guarantee that in three years’ time, there would be a market for it. So, this refinery must buy this crude oil from our own production, so that we will know that we have a guaranteed market.
“Out of that, if he buys 300,000 barrels per day, we will pay back part of this equity from the proceeds of that buying. We are taking off $2 from every barrel that this refinery buys as our payment, so it is not discounted.
“If he is to pay today’s price of $70 to a barrel, we can say we are giving you $2 to pay for this equity. So, it is a very good deal. Our evaluation was perfect – world class, and it is simply not possible to have a deal of this size.
“I can tell you that we are very proud that we entered into this negotiation. It has nothing to do with our ability to rehabilitate our refineries.”