90dbest:
You are too simplistic in your analysis. So dangote refinery will automatically stop the Nigerian factor of corruption in oil sector? Those amount you re projecting as gain will be looted be looted from the source by politician and dangote himself. I don't know what gives you people false hope in Nigeria sef.

No, I'm saying these thieves will have no excuses for their theft. If we refine our product, there won't be oil-for-fuel swap, so NNPC won't see any reason not to remit to the federal purse.

By the way, we are not discussing the elimination of corruption in the oil sector. We are debating how refining locally will be of impact to the overall scheme of things.

This Hundeyin chap has totally lost it and Nigeria, full of hateful and bigoted souls, provide him with an audience to use in assaulting our intellectual sensibilities.

Condolences to his victims

Efewestern:


Nigeria currently consumes 30-50million litres on average daily.

If Dangote is to refine 650,000 of our crude daily, he is likely to get over 102,700,000 liters of fuel, which is far above our daily usage. Meaning surplus will be available for export to nearby African countries that are to purchase these refined products in USD.

You are right.

But what guarantee do we have that we can offset about 50 to 70 million refined petroleum daily in the international market?

Again, if we find a market for these products, we will likely sell below $1 per liter to remain competitive. Egypt is the world's 25th largest exporter of petroleum and a litre sells for less than $0.4.

To compete with Egypt, Dangote needs to sell at least $0.5 per litre, this will generate about $35 million daily, far less than what we get from crude export.

Again, if Dangote pushes 50 to 70 million litres into the African market daily, it will cause the price of these products to fall.

If we target our West African neighbours, our biggest market will likely be the Benin Republic. A litre of fuel is about $1 there. So, we will likely be at $0.5 per liter for bulk purchases.

And these countries can't offset our 50 to 70 million daily surplus. Benin Republic consumes about 28,000 barrels per day which is less than 5 million litres.

Again, even if we offset all these products, what guarantee do we have that these African countries have the FX reserve to repatriate those funds?

And do you honestly think Dangote will move the earned dollars to Nigeria? And even if he does, what guarantee do you think our Northern politicians will allow those USDs to circulate through the banking system?

A lot of Nigerians make money from FX speculation and stabilizing the Naira is never in their plan.

Do you remember that Tinubu recently released up to $10 billion into the economy to pay off FX backlogs?

What happened?

Naira strengthened marginally for a few days and then depreciated heavily.

What do you think likely happened?

The influx of dollar crashed the price, these hawks bought and hoard the cheaper dollars and start selling through the black market at higher rate.


So, no matter how you look at it, Dangote Refinery will not have any substantial positive impact on our FX.

For me, cannibalizing our biggest FX sources to reduce FX usage is not wise. The refinery will only make Dangote more powerful not our Naira.

Efewestern:

Now, that's assuming the refinery will work at full capacity which is not likely at the moment. If Dangote is to meet our local demands, he just needs to refine 180-200k barrels/day and when you subtract that from our daily 1.5m crude production, you will see that we have 1.3m left for export.

My analysis was based on Dangote running at full capacity.

Efewestern:

Remember at a time we did crude oil swap. We gave foreign refineries free crude for them to supply us fuel and even at that, we ran at a huge loose. NNPC remitted nothing to the government coffers in 2022, this is because the revenues from crude sales was used to cover this shameful and shady oil-for-petrol swaps. Infact it was reported that NNPC owed merchants up to $3 billion this year alone.

Now, with Dangote refinery coming online, we are not bound to these things. Revenues made from selling crude to nearby African countries is enough to cover crude fee.

I have already explained why selling refined petroleum to these countries won't make up for the shortfall of supplying 650,000 barrels daily to Dangote and 400,000 to other refineries.

At the end of the day, these refineries will resort to importing their crude from other countries.

And this will kill the FX further.

tinsel:

Dangote is about to start refining. Obidients hate anything good about to happen to Nigeria. The news Dangote is about to start production is a bitter pill for them. They fear with this refinery, fuel prices might come down and foreign exchange might as well come. This is too much. Tinubu's government must not succeed. So we Obidients must formulate propaganda to see if we can kill this refinery. This is the mentality of all Obidients.

Petrol price to come down? So you have not read the Kyari statement? Forget what is happening in Nigeria have passed calling out obidents.

OfficialAPCNig:

You are right.

But what guarantee do we have that we can offset about 50 to 70 million refined petroleum daily in the international market?

Again, if we find a market for these products, we will likely sell below $1 per liter to remain competitive. Egypt is the world's 25th largest exporter of petroleum and a litre sells for less than $0.4.

To compete with Egypt, Dangote needs to sell at least $0.5 per litre, this will generate about $35 million daily, far less than what we get from crude export.

Again, if Dangote pushes 50 to 70 million litres into the African market daily, it will cause the price of these products to fall.

If we target our West African neighbours, our biggest market will likely be the Benin Republic. A litre of fuel is about $1 there. So, we will likely be at $0.5 per liter for bulk purchases.

And these countries can't offset our 50 to 70 million daily surplus. Benin Republic consumes about 28,000 barrels per day which is less than 5 million litres.

Again, even if we offset all these products, what guarantee do we have that these African countries have the FX reserve to repatriate those funds?

And do you honestly think Dangote will move the earned dollars to Nigeria? And even if he does, what guarantee do you think our Northern politicians will allow those USDs to circulate through the banking system?

A lot of Nigerians make money from FX speculation and stabilizing the Naira is never in their plan.

Do you remember that Tinubu recently released up to $10 billion into the economy to pay off FX backlogs?

What happened?

Naira strengthened marginally for a few days and then depreciated heavily.

What do you think likely happened?

The influx of dollar crashed the price, these hawks bought and hoard the cheaper dollars and start selling through the black market at higher rate.


So, no matter how you look at it, Dangote Refinery will not have any substantial positive impact on our FX.

For me, cannibalizing our biggest FX sources to reduce FX usage is not wise. The refinery will only make Dangote more powerful not our Naira.


My analysis was based on Dangote running at full capacity.



I have already explained why selling refined petroleum to these countries won't make up for the shortfall of supplying 650,000 barrels daily to Dangote and 400,000 to other refineries.

At the end of the day, these refineries will resort to importing their crude from other countries.

And this will kill the FX further.

Most West-African countries, if not all relies on European refineries for fuel importation. And fuel currently sells everywhere for a little under $1 in these countries.

Now, remember that proximity is a big plus to us and our west African neighbours. It won't break a bank for a ship to sail from PH/Lekki port to Ghana, but when importing fuel from Europe, these countries pay extra for haulage and insurance. We are at the upper hand, and if there's anything, it should be those Foreign refineries who should be worried because we are about snatch their markets.

Also, what makes you think African countries won't have the FX reserve to repatriate those funds? Aren't they paying those foreign refineries with $? Remember Ghana will be dealing with a private entity, and not the Nigerian state.

Let's look at the margin of profit when we refine and export, and compared to when we export raw crude.

A barrel currently cost $75. So 650,000 barrels should earn us $48,750,000. Now, if Dangote is to refine 650,000 and export to nearby west African countries at the rate of $0.6, we now have;

158 litres = 1 barrel
$0.6 X 158 = $95/barrel

$75 (Price of crude in the international market) - $95 = $20.

So Dangote makes $20 for a barrel refined. Please note that the profit will be higher if he's to sell at 0.7, but pegging at 0.6/litre is the most logical at the moment.

$95 X 650,000 barrels = $61,750,000.

$61,750,000 - $48,750,000 = $13,000,000.
After paying Nigeria for crude purchase, Dangote can only pocket $13,000,000, if he chooses not repatriate these funds to Nigeria, it won't still make any difference because we are not supplying him free crude. He buys like every other marketer.

There's also South African countries, in South Africa, fuel goes at high as $1.21 and they mostly import from European countries. Our refineries can key into these markets and crash the price of fuel by supplying for 0.6/litres.

There's no way you spin it that exporting raw crude is more beneficial than refining locally and exporting to nearby markets.

I'm optimistic about us coming out of this mess and local production of raw materials found in our soil is our only ticket out of poverty. If anyone should be exploiting the African markets, it should be blacks, no Europeans, not Russians, Not Indians or even Arabs.

So, if Nigeria no longer burns scarce FX on fuel importation, won't it be beneficial to the overall scheme of things? By not importing fuel, we are saving a whooping $11B yearly. Think the impact of this to the naira.

Efewestern:


Most West-African countries, if not all relies on European refineries for fuel importation. And fuel currently sells everywhere for a little under $1 in these countries.

No, Middle Eastern countries.

Efewestern:


Now, remember that proximity is a big plus to us and our west African neighbours. It won't break a bank for a ship to sail from PH/Lekki port to Ghana, but when importing fuel from Europe, these countries pay extra for haulage and insurance. We are at the upper hand, and if there's anything, it should be those Foreign refineries who should be worried because we are about snatch their markets.

That's is not how international trade work. Countries trade with each other more for political reasons than economies.

Egypt and Libya has one of the cheapest oil, yet many Africa countries prefer to trade with other nations.

Egypt to China is shorter than Nigeria to China, yet China gets more of their crude from Nigeria.

Why?

Nigeria is Chinese largest trading partner in Africa.

So, there is no guarantee these countries will just wake up and dump their current suppliers for Nigerian suppliers because of little difference in price.

Efewestern:


Also, what makes you think African countries won't have the FX reserve to repatriate those funds? Aren't they paying those foreign refineries with $? Remember Ghana will be dealing with a private entity, and not the Nigerian state.

If Nigeria, the largest economy in Africa is struggling to pay off FX backlogs, then there is no quarantee they can meet their FX obligations.

Efewestern:


Let's look at the margin of profit when we refine and export, and compared to when we export raw crude.

A barrel currently cost $75. So 650,000 barrels should earn us $48,750,000. Now, if Dangote is to refine 650,000 and export to nearby west African countries at the rate of $0.6, we now have;

158 litres = 1 barrel
$0.6 X 158 = $95/barrel

$75 (Price of crude in the international market) - $95 = $20.

So Dangote makes $20 for a barrel refined. Please note that the profit will be higher if he's to sell at 0.7, but pegging at 0.6/litre is the most logical at the moment.

$95 X 650,000 barrels = $61,750,000.

$61,750,000 - $48,750,000 = $13,000,000.
After paying Nigeria for crude purchase, Dangote can only pocket $13,000,000, if he chooses not repatriate these funds to Nigeria, it won't still make any difference because we are not supplying him free crude. He buys like every other marketer.

Two things are off with these analysis.

1. You are also assuming that Dangote will sell a litre for $0.6, that's about $95 per barrel. A barrel of crude is $75.

The cost of refining Saudi Arabia crude is around $20 per barrel while Nigerian crude cost nearly $13.

So, it will cost Dangote about $88 to refine a barrel. Now, when you factor in the costs of transporting the crude ad running the refinery, then you'll understand why Dangote will never sell at $95 per barrel or $0.6 per litre.

2. You are assuming that we will get 158 litres of refined petrol from a barrel of crude oil. That's wrong. A barrel can only give 73 litres of PMS.

So, even if Dangote runs at full capacity, he can only get 47.5 million litres which is still short of 50 million daily consumption.

So, there is nothing to export if he prioritises local consumption.

Efewestern:


There's also South African countries, in South Africa, fuel goes at high as $1.21 and they mostly import from European countries. Our refineries can key into these markets and crash the price of fuel by supplying for 0.6/litres.

Daily petrol consumption in South Africa is nearly 600,000 barrel per day, that is almost Dangote capacity.

If Dangote targets this market, then will need to import PMS to meet local demand.

Efewestern:


There's no way you spin it that exporting raw crude is more beneficial than refining locally and exporting to nearby markets.

Did I say that?

I only said that there will be less significant impact on our FX if all the refineries in Nigeria run at FULL capacity and we continue to produce 1.7 million barrels per day.

Unless we double out crude output, we will only cannibalize our largest FX source to minimise our FX usage.

Efewestern:


I'm optimistic about us coming out of this mess and local production of raw materials found in our soil is our only ticket out of poverty. If anyone should be exploiting the African markets, it should be blacks, no Europeans, not Russians, Not Indians or even Arabs.

Africans have zero leverage.

Efewestern:


So, if Nigeria no longer burns scarce FX on fuel importation, won't it be beneficial to the overall scheme of things? By not importing fuel, we are saving a whooping $11B yearly. Think the impact of this to the naira.

By selling 650,000 barrel to Dangote daily, we will be losing a potential $17.8 billion in FX annually.

And still have nothing to export.

OfficialAPCNig:

No, Middle Eastern countries.

Ghana and some other WA countries import lots of fuel from Europe, most Especially Italy. Middle East/Europe still doesn't change the fact that it cost far more buying fuel from Saudi Arabia/Italy than buying from Nigeria.

That's is not how international trade work. Countries trade with each other more for political reasons than economies.

Egypt and Libya has one of the cheapest oil, yet many Africa countries prefer to trade with other nations.

Egypt to China is shorter than Nigeria to China, yet China gets more of their crude from Nigeria.

Why?

Nigeria is Chinese largest trading partner in Africa.

So, there is no guarantee these countries will just wake up and dump their current suppliers for Nigerian suppliers because of little difference in price.

China gets lots of cheap crude from the Middle East (most especially from Iran) & Russia. They also source from Brazil and Saudi Arabia. Infact, Nigeria isn't even among their top 10 oil
trading partners. They have doubled down on their crude oil imports from Nigeria especially since sanctions were lifted on Iran and Russia beamed their search eastwards after the invasion of Ukraine.

Iran and Russia offered China a far better deal, and they didn't look back before dumping our sweet crude. Not everything is politics. Cheap crude oil will do China's economy more good than purchasing expensive Brent crude from Nigeria. Despite our years of trading, they dropped us for a far better deal when opportunity came knocking.

India didn't agree to West pressure to let go of Russia's crude oil. Infact, they came up with other means when the pressure was much on them. Do you think they took all those risks because of "Political reasons?" Heck no, Just like China, Cheap crude will do India's economy far more good. Or how do you expect their refineries to compete with others if they buy expensive crude ?

Take a look at China's top 10 oil trading partners in the first quarters of the year.

https://www.eia.gov/todayinenergy/detail.php?id=60401#:~:text=China%20sourced%20much%20of%20the,(250%2C000%20b%2Fd).

Governments all over West Africa are under pressure to beat down petrol prices, do you think they would turn down cheap fuel purchase from Nigeria when the opportunity comes?

If Nigeria, the largest economy in Africa is struggling to pay off FX backlogs, then there is no quarantee they can meet their FX obligations.

What are they currently using to buy fuel from refineries in Saudi Arabia? Italy? Do these West African countries use their Cedis or CFA? Or they source dollars to purchase the fuels and haulage fees?

Whatever means they use to settle Foreign refineries can also be used to settle our local refineries here.

By the way, You don't expect Nigeria to clear FX backlogs when majority of our FX earnings realized from crude oil sales are used to settle fuel importation. For decades we sold crude oil to import fuel.

Two things are off with these analysis.

1. You are also assuming that Dangote will sell a litre for $0.6, that's about $95 per barrel. A barrel of crude is $75.

The cost of refining Saudi Arabia crude is around $20 per barrel while Nigerian crude cost nearly $13.

So, it will cost Dangote about $88 to refine a barrel. Now, when you factor in the costs of transporting the crude ad running the refinery, then you'll understand why Dangote will never sell at $95 per barrel or $0.6 per litre.

Cost of refining fuel in Nigeria will always be cheaper than anywhere in the Middle East and Europe, which is even an edge. Our crude is sweet and light. There's also cheap labour.

Even it it takes $16/barrel to process, transport and run the refinery, a net profit of $4/barrel will still be a plus to Dangote.

How do you think the Chinese were able to knock our most steel industries? The mass produced cheap steels and aimed a very minimal profits. Plus it was cheaper to operate a steel industry in China that in USA. Dangote knows the task ahead and so he won't sought out huge profit margins.

The goal it to chase foreign competitors from our black market.

2. You are assuming that we will get 158 litres of refined petrol from a barrel of crude oil. That's wrong. A barrel can only give 73 litres of PMS.

So, even if Dangote runs at full capacity, he can only get 47.5 million litres which is still short of 50 million daily consumption.

So, there is nothing to export if he prioritises local consumption.

Of course I know It isn't possible to get only PMS from a barrel of crude. We get approx. about 72-82 litres of PMS / Barrel , 42 liters of Diesels / barrel, 20 litres of Jet fuel per barrel...

Now remember we use scarce FX to import PMS, Diesels, Jet Fuel etc. At full capacity. We won't be burning scarce resources to import these things.

Which do you prefer? We export every oil we drill and burn all revenue/FX sales to import fuel, Diesels, Kerosene etc?

Or you prefer we use a Portion of drilled crude oil meet local needs and export what is left, leaving some money to handle other important needs?

Please note that we can ramp up our production to 2m/day.

Daily petrol consumption in South Africa is nearly 600,000 barrel per day, that is almost Dangote capacity.

If Dangote targets this market, then will need to import PMS to meet local demand.

Once investors sees the potentials of having refineries, they will surely want to set up local refineries. Remember we have PH and Warri refinery coming up. I don't just want to count on anything the government is involved. They have proven to be failures.

Let's put our bet on Dangote and BUA. If these two refineries runs a full capacity, we will have enough to export. We don't need to satisfy the SA need. We just need to corner a portion.

Did I say that?

I only said that there will be less significant impact on our FX if all the refineries in Nigeria run at FULL capacity and we continue to produce 1.7 million barrels per day.

Unless we double out crude output, we will only cannibalize our largest FX source to minimise our FX usage.


By selling 650,000 barrel to Dangote daily, we will be losing a potential $17.8 billion in FX annually.

And still have nothing to export.

Why do you Omit the fact that Nigeria will earn FX by selling refined products to other African countries. Will South Africa pay Dangote in Rands? If we refine our entire oil production, we will still made a fortune.

Plus the massive jobs that will be created

Africans have zero leverage.

How do we have leverage when we don't want to take the pain to build? How do we grow when we are scared to compete and capture our space?

We are the only race that isn't in full charge of their space and we are doing nothing about this.

Brenbentondiaz:


A factory will have a greater value to a location far away from the point of production than to its own centre of production? Lolz. I've always said you guys should never be involving yourselves with anything that's a tad more technical than petty buying and selling. It's beyond you.

Lies

A factory will have greater impact at the point where its distribution chains stop. Stick to mining skulls.

Explain how Ogun will benefit more from dangote refinery than Anambra. I am interested in knowing how economicaly smart you're,

TopBanter:
This Hundeyin chap has totally lost it and Nigeria, full of hateful and bigoted souls, provide him with an audience to use in assaulting our intellectual sensibilities.

Condolences to his victims

What do you have to say now.

kanupapilo:

What do you have to say now.

Same thing Hundeyin is a nut case driven by Hatred and desire for fame

loffyloffy:


Same thing Hundeyin is a nut case driven by Hatred and desire for fame

Everything he predicted came to pass

David Hundeyin is undoubtedly the best Nigerian journalist.

kanupapilo:

Everything he predicted came to pass

So, imported fuel is the same a imported crude oil? Na wah o.

This writeup is mega crap.

March 2nd, 2024...and still not one drop of PMS from Dangote refinery, Kaduna refinery, Port Harcourt refinery etc.

Not one drop.

Fujiyama:



March 2nd, 2024...and still not one drop of PMS from Dangote refinery, Kaduna refinery, Port Harcourt refinery etc.

Not one drop.

Well. Na small small

https://www.qcintel.com/article/dangote-sells-first-oil-product-cargoes-report-21438.html