By Chibuzor Alli
Dangote Industries Limited has acquired 4,000 additional pieces of construction equipment as it expands its Lekki refinery to a planned capacity of 1.4 million barrels per day.
The new equipment brings the company’s construction fleet to 6,500 machines, including 330 cranes, the Group Vice President, Oil and Gas and Fertiliser, Devakumar Edwin, said on Friday.
Edwin disclosed this while briefing editors during a tour of the refinery in Ibeju-Lekki, Lagos.
He said Dangote initially acquired 2,563 pieces of equipment after Julius Berger and other contractors indicated that they lacked the capacity to construct 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.
Why Dangote bought its own equipment
Edwin said the decision to acquire the equipment instead of relying on foreign engineering, procurement and construction contractors was taken by Dangote Group President, Aliko Dangote, after the company determined 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 declined to construct the refinery’s main process buildings after reviewing the project drawings.
“They said, sorry, we cannot do any of your factory buildings. We don’t have the capacity,” he said.
He said the construction company subsequently handled 43 of about 127 auxiliary buildings, including canteens, transformer rooms, control rooms and fire-fighting houses.
According to Edwin, Dangote’s decision to develop its own construction equipment fleet was also influenced by Nigeria’s infrastructure deficit.
He recalled 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 refinery, 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.
Existing infrastructure to support expansion
Edwin said much of the infrastructure developed during the first phase of the refinery would also be used for the expansion, reducing the time and cost required for the project.
The existing facilities 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.
The refinery was originally designed to process 650,000 barrels of crude oil per day but is already operating above its nameplate capacity, according to Edwin.
“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.
Dangote rejects $2.5bn contractor fee
Edwin said Dangote also decided to execute the expansion through its own project company after international contractors 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.
“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.
Refinery targets higher output
Edwin said the Lekki refinery remained the world’s largest single-train petroleum refinery, with the previous largest facility having a capacity of 430,000 barrels per day.
He said the original design was based on both import substitution and exports, with 44 per cent of production expected to meet Nigeria’s requirements 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 have a combined refining capacity of 2.1 million barrels per day after the expansion and the construction of its 700,000 barrels-per-day refinery in Kenya.
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