(UPDATED) The recent spat between the promoters of the Dangote Refinery and the owners of Pinnacle Oil and Gas Limited is the latest in the series of altercations between Africa’s largest refiners and industry stakeholders in Nigeria. Aliko Dangote, one of Africa’s richest men and Chief promoter of the Dangote Refinery has been up in arms against individuals and entities he considers ‘’saboteurs’’ of his 20 billion dollars investment that is a 650, 000 bpd refining capacity largest single train refinery in the world. From International Oil Companies [IOCs] to the Nigerian National Petroleum Company [NNPC] over supply and pricing of crude oil and regulatory bodies like Nigerian Upstream Petroleum Regulatory Commission [NUPRC] and Nigerian Mid and Downstream Petroleum Regulatory Authority [NMDPRA] over what he considers their obligation to him in line with the Petroleum Industry Act [PIA] to oil trading companies, Dangote, like a furious hurricane has been shaking the pillars of Nigeria’s Oil and Gas industry to submission to his vested interest in the sector. And it will seem that Hurricane Dangote may have made a landfall a few metres away from his Lekki Free Zone refinery on PinnacleOil and Gas Limited.
An indigenous firm that has emerged a leading player in petroleum products marketing and distribution in Nigeria since it began operations twenty years ago in 2004, Pinnacle Oil and Gas Limited has emerged a major player in Nigeria’s oil and gas industry. Following many years of a lack of local refining capacity in Africa’s leading oil producer, resulting into a reliance on importation of its much needed energy products and services, Pinnacle Oil was one of the few indigenous entities that ventured into the volatile downstream value chain to fill in the energy supply gap in Nigeria. With a reputation for business integrity and quality service delivery, Pinnacle Oil has grown into a leader in the downstream sector of Nigeria’s oil and gas industry and by October 2022, the company delivered the largest petroleum terminal in Africa with a designed capacity to hold 1 billion litres of products its storage facility. Estimated to be worth 1 billion dollars, the terminal is equipped with a 40 km deep sea network of pipelines that links its storage facility to mother vessels hence eliminating the need for transfer of products to daughter vessels and enhance efficiency of both importation and export of products from the facility.
All appears to be well with Pinnacle Oil or so it seemed until Dangote made an allegation against the company bothering on issues of setting up a blending plant with the intention to distribute off spec petroleum products in Nigeria. This is not the first time Dangote will be making wild allegations against IOCs, NNPC, regulators such as NMDPRA and marketers. In fact Dangote has gone as far as suing marketers to court praying for judgement that restrains them from importation of petroleum products into the Nigerian market. This has left many with the impression that Dangote’s is pursuing a vested interest in Nigeria’s oil and gas sector that is monopolistic in nature. But to accuse a reputable company like Pinnacle Oil of intending to supply the marked with blended off spec products may have stretched Dangote’s obsession with his monopolistic ambition too far as to turn a friend to foe.
Pinnacle Oil and Gas Limited being an indigenous company has maintained a friendly relationship with Dangote Refinery and its promoters. It was on the basis of this relationship that Pinnacle Oil and Dangote Refinery entered into an agreement to link their facilities with an extended network of pipeline in order to facilitate present and future collaborative business ventures between them. The pipeline was to ease the procurement of products from Dangote Refinery on one hand and to make available their massive storage facilities for use in the event of an overflow of refined products from Dangote’s storage facilities. And with extensive network of distribution including a 750 truck a day loading point, Pinnacle Oil only sought to collaborate with a fellow indigenous company to spur the Lekki Free Trade Zone into a Rotterdam/Antwerp like oil and gas hub in Africa. But as long as Pinnacle Oil will continue to import products, it is not going to be spared the fury of Hurricane Dangote.
Whilst Pinnacle Oil and Gas has out rightly denied the allegation of setting up a blending plant to supply the Nigerian market with off spec products, it is important to point out the allegations that the alleged plant was going to blend ‘’high quality’’ Dangote petrol with low quality imported ‘’dirty’’ fuel is a clear technical and chemical impossibility that makes no market sense. Refined petrol cannot be blended further to produce a lower grade of petrol as that will amount to outright contamination of the product. Blending plants make use of naphtha, a hydro-carbon derivative that is a product of refining through catalytic distillation. Naphtha in combination with other chemical components under certain conditions may yield petrol through blending and not already refined petrol that is ready for utilization.
Dangote’s throwing of tantrums against operators and regulators in the oil and gas industry in Nigeria leaves an impression that the promoters of Dangote refinery may not have done their due diligence before venturing into the deregulated energy sector of Nigeria’s economy. With subsidy completely removed on petrol, Nigerians are now left at the mercy of fair pricing, which only competition can guarantee. Local refining and importation must exist side by side for the purpose of energy security. And Nigeria will not be the only country to allow importation even when it has local refining capabilities.
A 2023 report by Observatory of Economic Complexity [OEC], indicated that whereas Saudi Arabia with five functional refineries at home, exported about 45 billion dollars’ worth of refined products, the oil rich Kingdom also imported about 4 billion dollars’ worth of refined products. Similarly, the United States of America with 132 working refineries exported over 10 million barrels per day of refined products just as it imported over 8 million barrels per day of refined products. It is the same with Russia, an energy super power, which exported 67 billion dollars’ worth of refined product but also imported about 2 billion dollars’ worth of refined products. Despite having the largest refinery in the world with a refining capacity of 1.4 million bpd, India imported refined petroleum products in excess of 13 billion dollars in the year under review. Saudi exports to India and imports from India, America exports to Saudi and imports from Saudi just as Russia exports to China and imports from China also. Such is the complexities of international energy trade and exchange that promoters of Dangote Refineries must understand.
To guarantee the availability component of energy security, supply must exceed demands at all times hence the need to shore up from multi-jurisdictional sources. It will be economically suicidal to tie the energy security fate of 200 million Nigerian people to one refinery. Besides, Dangote’s refinery is located in a Free Trade Zone and has no obligation under the PIA or any other law of the Nigerian federation to offload all of its refined products into the Nigerian domestic market as he is at full liberty to export as much as he considers business wise. There is enough room for all operators in the mid and downstream sector of Nigeria’s energy sector to thrive under a competitive atmosphere. So Dangote should live and let Pinnacle live.
