The plan by Africa’s richest man to build a huge crude oil refinery in Nigeria has been flagged by Ghanaian downstream petroleum sector operators as a potential deathblow to the already comatose Tema Oil Refinery (TOR).
The Chief Executive Officer (CEO) of the Chamber of Bulk Oil Distributors (CBOD), Senyo Hosi sounded the alarm during the annual general meeting of the CBOD in Accra today October 1, 2019.
This threat posed to TOR by Dangote’s soon-to-be-commissioned refinery is also articulated in the CBOD’s annual report where it states that if Dangote Refinery is activated, it is likely to kill investor appetite for another refinery in the sub-region.
According to the report, when the Dangote refinery with a capacity of 650,000bbls a day is completed by 2021, it will add to the existing refinery in Nigeria to supply all the demands of Nigeria and still have a lot of products left to supply the sub-region.
“The Dangote effect is likely to inhibit investor appetite for additional greenfield refinery projects in West Africa. Ghana’s best option to trigger refining activity competitively remains a revamping of the Tema Oil Refinery,” the CBOD report warned.
According to industry data, Nigeria’s market in 2018 was about 21.3 million metric tonnes and is expected to grow to about 22.2mn mt in 2020 accounting for almost 54.4% of the total West African demand.
Nigeria’s current refinery operates at producing 445,000bbls/day even though it is producing at an 8.3% capacity combining that production with what Dangote plans would result in excess refined crude oil products in Nigeria. Consequently, Ghana would be the best destination for the excess products.
“The commencement of the Dangote refinery poses a direct threat to local refineries in Ghana, given the operational inefficiencies of Tema Oil Refinery,” said CBOD.
Meanwhile, bulk distribution companies (BDCs) may be looking forward to this because products from Nigeria would automatically improve their profit margins because transportation will cost them less.
CBOD warns that TOR which has been run aground by inefficiencies and debt can only benefit from the impending competition if it activates its operations through privatisation. “As the ‘new TOR’ shows adequate market activity beyond Ghana, the economic proposition for Ghana as a refining hub may be inked and the development of a greenfield will prove less risky and viable for investors,” the report suggested a plan for TOR to activate its activities urgently or lose being snuffed out by the new threat.