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Dangote refinery: an African model for industrial development ?

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Dangote refinery: an African model for industrial development ?

The refining complex recently inaugurated by Nigerian billionaire Aliko Dangote in Nigeria, equipped with state-of-the-art technology and boasting a processing capacity of 650,000 barrels per day, is positioned to radically transform the refining industry in Africa. This ultramodern facility, which stands in stark contrast to other less efficient refineries on the continent, aims to achieve greater operational efficiency and profitability.

According to a report published on April 4 by Ecofin Pro, a specialized platform of the Ecofin agency, this refinery embodies the hope of a renaissance for the African refining sector, long marked by operational and financial difficulties. The paper, entitled "Why Aliko Dangote's oil refinery can succeed where other African refineries have failed", points out that refineries on the continent generally operate well below their theoretical capacity, with utilization rates particularly low in sub-Saharan Africa.

These under-performances are mainly due to crude oil supply problems, exacerbated by price volatility and contractual constraints in producing countries, as well as operational deficiencies due to the obsolescence of the technologies used and the lack of skills among the workforce. What's more, the majority of equipment has to be imported, hampering the maintenance and modernization of existing facilities.

African refineries also face profitability challenges due to their low capacity, ranging from 10,000 to 210,000 barrels per day. Paa Kwasi Anamua Sakyi, analyst at Ghana's Institute for Energy Security, argues that economies of scale are essential to refinery profitability, enabling fixed costs to be better spread over a higher production volume.

The Dangote refinery, on the other hand, benefits from a number of competitive advantages, such as its large capacity, which favors economies of scale, and a diversified and judicious sourcing strategy. The latter includes agreements with the national oil company NNPC, as well as with US producers, to ensure stable, profitable long-term supply.

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In addition, the facility is distinguished by its integration of advanced digital technologies such as the Internet of Things (IoT), cloud computing, artificial intelligence (AI) and Machine Learning, which optimize data collection and processing. With an investment of $19 billion, it also boasts sophisticated storage and transport infrastructures, including a complete marine terminal and modern equipment for handling crude oil and finished products.

These assets position Aliko Dangote's refinery not only to meet Nigeria's domestic needs for petroleum products, but also to contribute to exports, while serving as a model for a more modern, efficient and sustainable refining industry on the African continent.

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