Dangote Industries Limited has expanded its construction equipment fleet with the acquisition of 4,000 additional machines as work progresses on plans to increase the capacity of its Lekki refinery to 1.4 million barrels of crude oil per day.
The latest acquisition has raised the company’s construction equipment inventory to 6,500 machines, including 330 cranes.
The Group Vice President, Oil and Gas and Fertiliser, Devakumar Edwin, revealed this on Friday during a briefing with editors following a tour of the refinery in Ibeju-Lekki, Lagos.
Edwin said the company’s decision to build its own extensive equipment fleet began after Julius Berger and other contractors informed Dangote that they did not have the capacity to handle the construction of the refinery’s main factory buildings.
He explained that the company subsequently purchased 2,563 pieces of equipment for the initial phase of the project, an investment that made Dangote the second-largest company globally in terms of construction equipment at the time.
With the additional 4,000 machines purchased for the expansion, he said the company has now moved into the position of having the largest construction equipment fleet in the world.
“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.
Edwin said the decision to purchase the equipment was taken by Dangote Group President, Aliko Dangote, after the company assessed the financial implications of bringing foreign engineering, procurement and construction contractors into the project.
According to him, using overseas contractors would require the transportation of their heavy equipment into Nigeria and its subsequent removal after the project, while the associated depreciation costs would also be reflected in the project bill.
“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,” he said.
He recalled that Julius Berger reviewed the refinery’s drawings but later informed the company that it could not undertake the construction of the main process buildings because it lacked the required capacity.
“They said, sorry, we cannot do any of your factory buildings. We don’t have the capacity,” he said.
Edwin said Julius Berger was nevertheless engaged to construct 43 of the approximately 127 auxiliary buildings within the refinery complex.
The facilities handled by the construction company included canteens, transformer rooms, control rooms and fire-fighting houses.
He said Dangote’s decision to develop its own construction equipment capacity was also influenced by the limitations created by Nigeria’s infrastructure deficit.
Edwin recalled that when the company was constructing the Apapa sugar refinery in 1998, Nigeria had only two large cranes with a lifting capacity of 150 tonnes each.
He said the scale of the Lekki refinery project required the company to secure specialised equipment, including one of only two 5,000-tonne cranes in the world.
In addition to the heavy-lift crane, Dangote purchased 330 cranes to support construction activities.
“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 stated.
Edwin explained that the infrastructure already established for the refinery’s first phase would also serve the expansion project, thereby helping Dangote reduce the amount of money and time that would otherwise be required to develop new facilities.
Among the infrastructure available for use are a granite quarry with a production capacity of 10 million tonnes, 82 concrete batching plants and 203 transit mixers.
The facilities also include a private port, an oxygen and welding-gas plant, as well as accommodation facilities capable of housing 50,000 workers.
On the refinery’s current output, Edwin said the facility was initially designed with a processing capacity of 650,000 barrels of crude oil per day but has since exceeded that level.
“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,” he said.
Edwin also explained why Dangote chose to use its own project company to drive the refinery expansion instead of handing the project to international contractors.
He said international contractors had submitted proposals involving fees of about 12.5 per cent of the estimated $19.5 billion capital cost of the expansion.
Based on that arrangement, the fees would have been approximately $2.5 billion, a cost Dangote considered too high for design and supervision alone.
“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 the decision to proceed with the project internally was reinforced by a statement from Aliko Dangote, who pointed to a plaque on his table carrying 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 further described the Lekki facility as the world’s largest single-train petroleum refinery, noting that the largest refinery of its kind before it had a capacity of 430,000 barrels per day.
He said the refinery was conceived to serve both domestic and international markets, with its original design providing for 44 per cent of output to meet Nigeria’s domestic requirements and the remaining 56 per cent to be exported.
“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 explained.
According to Edwin, the facility was also designed to manufacture Euro 5 and Euro 6-grade products while having the flexibility to process different grades of crude from across Africa, in addition to United States West Texas Intermediate crude.
He disclosed that once the planned expansion and the construction of Dangote’s 700,000-barrel-per-day refinery in Kenya are completed, the group’s total refining capacity will reach 2.1 million barrels per day.
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