More facts have emerged on why Africa’s richest man, Alhaji Aliko Dangote, decided to list his 650,000 barrels per day capacity petroleum refinery on the stock market....READ THE FULL ARTICLE HERE ▶▶
Nigerians had come out to celebrate the commencement of operations at the world’s largest single-train crude oil refinery in the world on January 18, 2024, after years of delay….READ FULL ARTICLE
According to BH findings, the failure of the nation’s national petroleum company, NNPCL, to supply the much needed crude feed stock to Dangote Refinery based on an earlier Agreement between them, which offered Nigeria 20 percent equity in the refinery, divided into $1.02 billion cash payment, and $1.7 billion in guaranteed crude supply to the refinery.
However, BH can now report that NNPCL’S default on the second part of the agreement was because it has largely mortgaged Nigeria’s future oil production for advance cash payments, which has left the country with less than a third of its total production output.
This default has suddenly faced the refinery with the herculean task of finding the cash to fund its crude supply to meet its full production target. Although, President Bola Tinubu had recently directed crude supply to the refinery, experts say that it may too little too late for the company given the fact that there is not available stock to supply, much less for payment in naira.
According to them, while the refinery has 650000 barrel capacity, the nation’s available stock after all the deductions for forward supply tied to loans, only about 370,000 barrels are available to Nigeria for m the current 1.4 mbpd output.
As such, the refinery cannot possibly depend on local supply of crude for its operations, and must source for the funds to buy from the international market.
The refinery had earlier received its first cargo of 1 million barrels of crude oil from Shell International Trading and Shipping Co (STASCO) on December 8, 2023. Within a spate of two weeks, it received four more cargoes, three from state oil firm, NNPCL, and one from ExxonMobil.
On January 9, 2024, the plant received its sixth cargo shipment of 1 million barrels of crude to help facilitate its initial run as well as kick-start the refining of intermediate products, such as diesel, aviation fuel, polypropylene, naphtha and Refined Chemical Oil (RCO)
Unfortunately, Dangote Refinery has been unable to receive a fair share of crude oil allocations from the Nigerian National Petroleum Corporation Limited (NNPCL) and International Oil Companies (IOCs) operating in the country, a situation that has forced the management of the plant to source crude from far away countries like the United States and Brazil.
Though, the plant is currently refining gasoline, popularly known in Nigeria as petrol, which, it says, will be released into the market anytime from now, the non-availability of crude oil locally, Business Hallmark learnt, has slowed down the ramping up of production as planned.
Also, IOCs have been struggling to supply the needed balance owing to irrevocable supply agreements it signed with off-takers and funding partners.
Successive civilian administrations, it was learnt, took foreign loans backed by future oil productions to help balance their annual budgets.
Specifically, in August 2023, NNPC secured a $3.3billion emergency crude oil repayment loan for the Federal Government from the African Export-Import Bank (Afreximbank) to help stabilize the naira.
The facility, NNPCL had explained, was to help the government to meet some of its dollar obligations and assist the Central Bank of Nigeria (CBN) to stabilize the foreign exchange market.
Known as Project Gazelle, the crude for loan facility was arranged by Afreximbank with a consortium of crude oil off-taker lenders, including Oando Group and Sahara Energy Resource Limited.
Part of the deal include setting aside 90,000 barrels of crude daily at a lower price benchmark of $65/barrel in order to reduce the risk of default.
On July 10, 2024, NNPC announced it is negotiating another loan of $2billion to boost its finances and allow investment in its business. In exchange for the loan, the national oil company will trade between 30,000-35,000 barrels per day of Nigeria’s crude production.
The new facility will effectively raised the firm’s crude-backed loans to $5.3billion in eleven months (August 2023 to July 2024).
In essence, Nigeria, in a spate of one year, mortgaged 125,000 barrels a day of her future crude production in exchange for funds.
Apart from the recent two oil-backed loan deals, BH reliably gathered from industry players that NNPC has not exited the controversial crude for refined products swap deal it entered into with suppliers.
Also, NNPC Exploration and Production Limited (NEPL’s) capital commitments to Eagle Export Financing Limited stand at $352.88 million (N158.3 billion) as of December 31, 2022.
The deal is in relation to the forward sale agreement with Eagle Export Financing Limited for the delivery of crude oil. Based on the agreement, NNPC, through NEPL, must nominate, schedule and deliver, at least, 1,800,000 barrels of crude oil at Eagle Export Limited delivery terminal commencing from August 28, 2020.
NNPCL confirmed this in Its latest audited report, which stated that also its subsidiary, NEPL, recorded capital commitments of $352.88 million as of December 31, 2022.
In the same vein, NNPC acquired 40 percent of Chevron Nigeria’s interest in OML 86 and 88 in April 2021, after beating Conoil to the deal. To acquire 40 percent of Chevron Nigeria’s interest in OML 86 and 88, the national oil firm confirmed to BH back in 2021 that finances were raised through a forward sale agreement with Middleton Export Funding Limited to fund the acquisition through Project Brogue.
According to available records, as of December 31, 2022, only $33.36 million has been paid back by NEPL to Middleton Funding Limited, a subsidiary of MRS Holdings Ltd, which belongs to the family of Sayyu Dantata, the 53-year-old younger half-brother of Alahji Aliko Dangote, out of the $300 million commitment.
Though, several industry sources informed BH that there are still several undisclosed crude swap deal entered into by the NNPC that were secretly signed, this newspaper could not independently verify the claims.
However, based on the largely verifiable crude swap deals NNPC had owned up to, the nation had traded off at least 45% of its present and future oil production and will not get any financial benefits from it.
Multiples sources put the combined figures of crude oil either swapped for petrol or committed at between 250,000 barrels per day to 400,000 barrels.
The commitment of a substantial amount of the nation’s future crude output in exchange for either loans, share purchases or services, it was learnt, largely contributed to the inability of NNPCL to pay the balance of the 20% stake it acquired in Dangote Refinery.
NNPC had agreed to purchase the shares for $2.7billion, but only fulfilled payment of $1.06billion by the due date in June 2024, which resulted in the reduction of its stake to 7.2%.
The failure of NNPCL to pay up its remaining equity cost of $1.76 billion in Dangote Refinery impacted on the refinery’s cash reserves.
As a result, the inability of the national oil company to pay up the equity balance of $1.76 billion, and the failure to supply the pledged 300,000bpd crude oil to the refinery, is forcing Dangote Refinery to look elsewhere for the much needed funds and feedstock.
“We plan to list the refinery and petrochemical before the end of the first quarter of next year”, Dangote had told journalists in July.
Multiple sources in the oil and gas and financial industries informed BH that Dangote Refinery needs the funds realised from the share sales to procure crude oil and service outstanding loans.
According to credit rating agency, Fitch Ratings, the decision of NNPCL not to exercise its option of acquiring an additional 12.75 per cent may impact the Dangote Industries ability to service loans.
“Since the option has not been exercised, the group plans to divest a 12.75 per cent stake in DORC in 2024.
“The group intends to service its significant syndicated loan maturing in August 2024 from the equity divestment.
“However, timely divestment and meeting the imminent maturity are highly uncertain in our view”, Fitch said….READ FULL ARTICLE
