August 8, 2022

Comparing Hollyfrontier‘s Sinclair Refinery Deal With NNPC’s Dangote Refinery Equity Is Untenable

3 min read

The social media went agog on Friday with various comments and comparison of Hollyfrontier’s US$2.6 billion payment for the 678,000 bpd Sinclair refinery with the NNPC’s $2.7billion equity of the 650,000 bpd Dangote refinery.

Majority criticizing and condemning the NNPC’s equity shares in Dangote Refinery should know that the Hollyfrontier US$2.6 billion deal does not include exploration and production assets owned by Sinclair Oil & Gas.

Although Sinclair Refinery is ranked on the list of largest privately owned American corporations, the Hollyfrontier is paying for almost all of Sinclair Oil’s assets but will invest additional funds aside the US$2.6 billion in new refining, pipeline and storage facilities in the U.S. Rocky Mountain region.

The Pipeline Infrastructure at the Dangote Petroleum Refinery is the largest anywhere in the world, with 1,100 kilometers to handle 3 Billion Standard Cubic Foot of gas per day. The Refinery alone has a 400MW Power Plant that is able to meet the total power requirement of Ibadan DisCo.

The Refinery will meet 100% of the Nigerian requirement of all refined products and also have a surplus of each of these products for export.

Dangote Petroleum Refinery is a multi-billion dollar project that will create a market for $11 Billion per annum of Nigerian Crude.

Now, let us look at the facilities at the Dangote Refinery and compare it to the facilities Hollyfrontier is paying for at Sinclair refinery.

The Dangote Refinery will produce Euro-V quality gasoline and diesel, as well as jet fuel and polypropylene.

The processing facilities at the refinery include a crude distillation unit (CDU) and associated facilities, mild hydrocracking (MHC) unit, residual fluid catalytic cracking (RFCC), naphtha hydrotreater, and RFCC gasoline hydrodesulfurisation (HDS) unit, as well as alkylation units.

Sulphur recovery and hydrogen generation facilities, and a polypropylene unit is also included. The hydrogen generation complex will contain two steam methane reformer (SMR) units. These will generate 200,000Nm³/h of hydrogen and steam, which will be used to produce sulphur-free fuels.

The refinery has infrastructure facilities such as a pipeline system, access roads, tank storage facilities and crude and product-handling facilities. A marine terminal, including a breakwater, jetty and harbour, is also part of the refinery.

The Dangote refinery will have an annual refining capacity of 10.4 million tonnes (Mt) of gasoline, in addition to 4.6Mt of diesel and 4Mt of jet fuel.

It will also produce 0.69Mt of polypropylene, 0.24Mt of propane, 32,000t of sulphur and 0.5Mt of carbon black feed.

Economically, the United States has a top tax rate of 21% while Nigeria tax rate is 30%.

Nigeria Gross Domestic Product (GDP) per Capita as at Dec 2020 is 2,073.783 USD while the GDP per capita for United States of America was 63,416 USD.

In the United States, oil production costs are $36 a barrel while producing a barrel of oil in Nigeria cost $30 per barrel, on average.

Nigerians should know that the NNPC 20% Equity covers the $10 billion invested in the refinery, $2.5 billion in the fertilizer factory and $2.5 billion in pipeline infrastructure.

The Dangote Refinery with a single crude oil distillation unit will be the largest single-train refinery in the world.

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