Dangote reduces stake in refinery business to 65%,

By Adewale Sanyaolu

The President of Dangote Industries Limited, Aliko Dangote, has indicated the firm’s desire to reduce its stake in the refinery from 100 to 65-70 per cent.

Dangote disclosed this in an interview with S&P Global commodities on Tuesday. He said that within the next year, the refining business will list five to 10 percent of its shares on the Nigerian stock exchange, mirroring a playbook established by the group’s cement and sugar businesses.

“We don’t want to keep more than 65 per cent-70 per cent,” Dangote said, explaining that shares will be offered incrementally subject to investor appetite and market depth.

To expand the refinery and develop a new petrochemical project in China, Dangote is actively considering a strategic partnership with Middle Eastern companies, the group president remarked.

“Our business concept is going to change. Now, instead of being 100 per cent Dangote-owned, we’ll have other partners,” he said.

The door remains open for Nigerian National Petroleum Co. to boost its stake after the state oil company trimmed its interest to 7.2 per cent, Dangote said, but not before its next phase of growth is well underway.

“I want to demonstrate what this refinery can do, then we can sit down and talk,” Dangote said.

However, a close aide, who was not authorised to speak publicly said the company would exercise caution before inviting additional participation from NNPC.

As part of plans to expand the refinery’s capacity, Dangote had earlier in July, unveiled plans to expand from its current 650,000 b/d to 700,000 b/d by the end of the year.

Now the target is to reach 1.4 million b/d, with no specified date, a scale that would surpass the world’s largest 1.36 million b/d refinery in Jamnagar, India.

Expanding could involve building a second refinery with the same configuration, one engineer said, potentially with the addition of a vacuum distillation unit to boost light ends yields. The company is also working on potential linear alkylbenzene and base oils projects, and aims to grow its annual polypropylene capacity from 1 million mt to 1.5 million mt in the next few years.

Costly refinery upgrades are not for the fainthearted in a saturated global market where margins are notoriously volatile. According to forecasts from the International Energy Agency, the world will already have 11.4 million b/d more refining capacity than it needs by 2030, concentrated mostly in China and India.

But Dangote rejects a model that leaves Africa dependent on imported fuel, and remains determined to disrupt a market shaped by economies of scale. He is not optimistic for state-backed African projects, and warns that the continent will “really be in trouble” without huge private investment.

“Most African governments will not have the capacity to build a refinery,” Dangote said, calling smaller projects like Angola’s new Cabinda facility “a drop in the ocean.”

“In places where interest rates are 30 per cent,some countries 20 per cent, the cost of funding is high. And the infrastructure is zero,” he said.