Dangote Industries Limited has expanded its construction equipment fleet to 6,500 machines as work progresses on the expansion of its Lekki refinery to 1.4 million barrels per day.
The company’s Group Vice President, Oil and Gas and Fertiliser, Devakumar Edwin, disclosed this on Friday during a briefing with editors at the refinery in Ibeju-Lekki, Lagos.
Edwin said Dangote recently acquired an additional 4,000 pieces of construction equipment, including 330 cranes, after initially purchasing 2,563 machines when contractors said they lacked the 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.
He said the decision to purchase the equipment was taken after the company found that engaging foreign engineering, procurement and construction contractors would significantly increase the cost of the project.
“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,” Edwin said.
He recalled that Julius Berger had declined to construct the refinery’s main process buildings after reviewing the project drawings, citing a lack of capacity.
“They said, sorry, we cannot do any of your factory buildings. We don’t have the capacity,” he said.
According to Edwin, Julius Berger subsequently constructed 43 of about 127 auxiliary buildings, including canteens, transformer rooms, control rooms and fire-fighting houses.
He said the infrastructure deficit in Nigeria also influenced the decision to build Dangote’s own construction equipment fleet.
Edwin recalled that when Dangote built the Apapa sugar refinery in 1998, Nigeria had only two large cranes, each with a 150-tonne capacity.
For the Lekki refinery project, the company hired one of only two 5,000-tonne cranes in the world and also purchased 330 cranes of its own.
“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 said.
Edwin said existing infrastructure from the first phase of the refinery would be used for the expansion, reducing both cost and construction time.
The infrastructure includes 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.
He said the refinery, initially designed to process 650,000 barrels of crude oil per day, was already operating above its nameplate capacity at about 700,000 barrels per day.
“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.
On the decision to execute the expansion through Dangote’s own project company, Edwin said international contractors had quoted fees of about 12.5 per cent of an estimated $19.5bn capital cost.
He said the proposed fees would have amounted to about $2.5bn, which prompted the group to reject the arrangement.
“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 Dangote subsequently challenged the company to execute the project internally, recalling the group president’s response: “Edwin, have you forgotten the plaque on my table?”
According to Edwin, the plaque bears the inscription, “Nothing is impossible.”
“That is how we took up the challenge, and a Nigerian company, Dangote Projects Limited, designed the detailed engineering, went for the tenders, bought every single item, even the nuts and bolts, we bought directly, and engaged contractors, and we constructed the refinery,” he said.
Edwin described the Lekki facility as the world’s largest single-train petroleum refinery, noting that the largest facility before it had a capacity of 430,000 barrels per day.
He said the original refinery design was based on import substitution and exports, with 44 per cent of production intended to meet Nigeria’s requirements and 56 per cent earmarked for export.
“95 per cent of our production is high value, either petrol or diesel or jet fuel. Only five per cent is lower, and even that five per cent is actually an industrial product, carbon black feedstock,” he said.
Edwin added that the refinery was designed to produce Euro 5 and Euro 6-grade products and process a wide range of African crude grades, as well as United States West Texas Intermediate crude.
He said Dangote’s total refining capacity would reach 2.1 million barrels per day after the Lekki refinery expansion and the construction of its planned 700,000-barrel-per-day refinery in Kenya.
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