Dangote Industries Limited has acquired 4,000 additional pieces of construction equipment as part of efforts to expand its Lekki refinery in Lagos. The new equipment has increased the company’s construction machinery fleet to 6,500 machines as the refinery expansion moves forward. The expansion is expected to raise the refinery’s processing capacity to 1.4 million barrels of crude oil per day.
Devakumar Edwin, Group Vice President, Oil and Gas and Fertiliser at Dangote Industries, disclosed the development during a briefing with editors while they toured the refinery in Ibeju Lekki, Lagos. According to Edwin, Dangote initially purchased 2,563 pieces of construction equipment after Julius Berger and some other contractors indicated that they did not have enough 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.
Edwin explained that the decision to purchase the equipment was made instead of relying entirely on foreign engineering, procurement and construction contractors. He said the move was driven by the cost of bringing foreign contractors and their equipment into Nigeria. According to him, the company’s President, Aliko Dangote, decided that purchasing the equipment would be more economical.
“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 said Julius Berger reviewed the refinery’s drawings but later declined to construct the main process buildings because it lacked the required capacity.
“They said, sorry, we cannot do any of your factory buildings. We don’t have the capacity,” he said.
The construction company, however, went ahead to handle 43 of about 127 auxiliary buildings. These included canteens, transformer rooms, control rooms and fire fighting houses. Edwin said Dangote’s decision to develop its own construction equipment fleet was also influenced by Nigeria’s infrastructure challenges. He recalled that when the company constructed its Apapa sugar refinery in 1998, Nigeria had only two large cranes with a 150 tonne capacity. For the Lekki refinery project, Dangote hired one of only two 5,000 tonne cranes available globally at the time and also purchased 330 cranes for the project.
“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.
The company also plans to use much of the infrastructure developed during the first phase of the refinery for the expansion. Edwin said this would help reduce both the cost and time required to complete the project. 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 up to 50,000 workers. The refinery was originally designed to process 650,000 barrels of crude oil daily. However, Edwin said it is already operating above that level.
“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 also rejected proposals from international contractors that would have charged about 12.5 per cent of the refinery’s estimated $19.5 billion capital cost. According to Edwin, the proposed fees would have amounted to about $2.5 billion.
“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 said the refinery’s expansion is being handled by Dangote Projects Limited, which undertook detailed engineering, procurement and construction activities. The refinery remains the world’s largest single train petroleum refinery, with production designed around both domestic supply and exports. Edwin said 44 per cent of the refinery’s output was originally intended to meet Nigeria’s domestic requirement, while 56 per cent was planned for export. He added that 95 per cent of production consists of high value products such as petrol, diesel and jet fuel.
After the planned expansion and the construction of Dangote’s 700,000 barrels per day refinery in Kenya, the company is expected to have a combined refining capacity of 2.1 million barrels per day.
