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The race for crude oil domination will become even more interesting as China is set to go head-to-head with African giant, Dangote in the refinery business. With its reputation as the world’s biggest single-refinery train at 650,000 barrels per day capacity (bpd) after its completion in 2020, the Dangote Petroleum Refinery has the potential to meet Nigeria’s, if not Africa’s refining needs. However, it is bound to face a new rivalry against the Chinese refinery eyeing the African market.
The Chinese government is deciding to shut down independent refiners who operate at an estimated 500,000 bpd refining capacity. These independent refiners, commonly called ‘teapots’ in Shandong Province, are to be sacrificed for the building of a massive $20-billion refinery and petrochemical complex according to a Reuters report.
China has reportedly had its eyes on African and Latin American refined product markets since 2018 mainly due to its increased exports in the area. Since Africa exports the bulk of its crude, the market for refined products is huge in Africa. In April 2018, China exported a whopping 50,000MT to Togo and surpassed this order with an expert of 51,000 Metric Tonnes of gasoline to Nigeria in January 2019. This revealed the attractiveness of the market and spurred China’s largest petrol exporter, PetroChina to set up shop in Nigeria.
Even more so, reports by energy intelligence firm, SP Platts, show a growth in China’s petrol exports to African countries with Mozambique and South Africa climbing to the top 10 destinations in January 2019, receiving 147,000 mt and 82,000 mt of petrol, respectively.
This move comes after years of planning by the Chinese Authorities to establish a large scale refinery to process all the crude obtained with their status as the world’s largest buyer of the commodity. It is suspected that the ambition is purposed to reinvigorate its ailing economy which was thrashed by COVID-19.
China’s refinery will have a 400,000 bpd processing capacity, an ethylene plant producing 3 million tons per year to serve the country’s growing overseas market (especially in Africa) when it is completed in 2024. On the other hand, Dangote Refinery is a planned 650,000 bpd refinery with 838 KTPA Polypropylene Plant, expected to be the world’s second-largest Urea Plant at 3 Million Tons per annum. It would have the largest sub-sea pipeline infrastructure in any country in the world at 1,100 Kms to handle 3 Billion Standard Cubic Foot of gas per day. Additionally, it would have world-scale gas treatment stations, world-class petrochemical complex.
The refinery, situated in Lekki, costs a whopping $12 billion as it plans to meet 100% of Nigeria’s petroleum import requirement and create a market for millions of barrels of Nigeria’s crude currently stranded atop vessels in search of buyers.
As impressive as Dangote Refinery sounds, China’s proposed refinery could still pose a potent threat unless it benefits from government protection. Judging from the amount of political capital Nigeria has already invested in the refinery’s success and its founder’s massive record of philanthropy and investments in the country, government protection will not be too far-fetched.