Since commencing oil production in 2019, Guyana’s fortunes have changed dramatically. With a population of just 800,000, this small South American nation is on track to become one of the world’s leading oil producers per capita in 2024, potentially surpassing major oil-producing nations like Saudi Arabia and Qatar shortly.
This newfound wealth has already transformed Guyana’s economic landscape and sparked vital discussions about the potential benefits and challenges of such an unprecedented oil boom.
In 2016, data shows that Guyana struck oil off its coast, with estimated reserves of 11 billion barrels. This discovery marked a turning point for the nation, whose GDP of 62.3% in 2022 is projected to triple by 2027, fueled by an estimated production of 4,000 barrels per day.
With its potential per-capita oil reserves rivalling even Saudi Arabia, Guyana could see its GDP soar to $10 billion by 2030.
This rapid growth, including an impressive 38% in 2023 and a projected 21% in 2024, has led some to liken Guyana to “South America’s Dubai,” due to its oil-driven economic boom and ambitious.
While Guyana’s oil boom holds immense promise, it also raises concerns and challenges that other oil-rich nations have faced.
History serves as a cautionary tale, with countries like Venezuela, Angola, and the Congo experiencing the downside of sudden resource wealth. Social conflicts, political instability, and the erosion of democratic institutions are common pitfalls for nations heavily reliant on oil revenue.
The construction of Silica City, an ambitious project in Guyana by President Irfaan Ali, symbolises the nation’s aspirations for grand infrastructure development. Large-scale projects, while showcasing growth potential, also run the risk of inefficiency and waste.
Guyana must strike a balance between realising its ambitious visions and ensuring that development projects contribute to the well-being of its citizens.
President Irfaan Ali said in an interview with Americas Quarterly, “There is no resource curse; the resource is a blessing. It’s a management curse, and we are doing everything to avoid that.”
“We are not building an energy nation; we are building a diversified economy that is focusing on many areas of growth,” Ali said.
Silica City is envisioned as a hub catering to technology professionals and other industries facing challenges finding space in the thriving capital, Georgetown.
Financed by resources derived from the oil industry, the city is set to channel investments into critical areas such as tourism, food production, industrial development, manufacturing, and biodiversity services, which will be “major growth areas of the future,” Ali said.
With production reportedly ongoing at the 650,000 barrel- per- day capacity Dangote Refinery and marketable products expected any time from this month, the marketers of petroleum products were eagerly awaiting the release its pricing template to enable them negotiate the commercial terms for the lifting of products from the facility, THISDAY has learnt.
Some of the marketers, who spoke to THISDAY exclusively, said they were also eager to know the mode of sale of the products to the offtakers – whether the marketers will pay in naira or dollar and whether the refinery will supply the marketers through its equity partner, the Nigerian National Petroleum Company Limited (NNPCL), or through direct delivery to the open market.They, however, postulated that the entry of the products from the facility into the market would potentially trigger a change in the downstream business dynamics in the country.
They also predicted that with the refinery located in Nigeria where marketers can easily lift products with their trucks and within a short period of making orders, ownership of tank farms and storage facilities may no longer be a viable venture.The downstream players further predicted that the refinery would further shape the petroleum products marketing business in the country this year and beyond, particularly in the area of pricing, if it consistently makes sufficient volumes available in the market with the right quality.Dangote Refinery, according to the promoters, started operation penultimate Friday with production of diesel and aviation fuel, saying sellable products from the facility would hit the market this January.
Speaking to THISDAY, the Managing Director of 11Plc, Mr. Tunji Oyebanji; who said he was aware that some marketers were being registered with the Dangote Refinery as offtakers, added that discussion on commercial terms, including whether the refiner would sell to marketers in naira or dollar, has not happened yet.He said marketers were currently waiting for the refinery to release its pricing template so that discussion around that could commence.Oyebanji explained: “I’m not aware that the discussion has reached the stage of whether he will be selling products to marketers in naira or dollars. I think people are just taking the first step to register. Now that they said the product is being made, I guess the next stage will be for them to say ‘this is how we would like to sell – this is the terms’.
“So, it is when we see that that we will know and then we would then have further discussion. This transition too is a bit dicey because, don’t forget, some people may have existing inventory of those products in their tanks. Maybe, you have bought a product in your tank at N500, then Dangote is going to sell it at N200, you know you will be in trouble with that product you have in your tank.”
He said another thing to be considered by marketers would be whether Dangote would produce enough quantity to meet market demand or it would be producing small quantities that would necessitate secondary supply to augment, which he said, will become a problem to the marketers and the market.“So, all these things are market details that you have to work out to know how much quantity. For instance, if they tell me to come and register as a company and they tell me their terms and I say the terms are acceptable to me, but I want 50,000 metric tonnes and then, they said they can only supply me 3000 metric tonnes.
“If you are a customer and marketer that normally sells 15,000 metric tonnes in a month, you know you are in trouble because you will still need the difference to meet up. So, a lot of that needs to be sorted out. But all we know for now is what we read in newspapers that production of AGO (diesel) and ATK has started. But what quantity, what price, nobody knows”, he said.
He further argued that with the refinery located in Nigeria where marketers can easily go and pick products with their trucks and within a short period of making orders, ownership of tank farms and storage facilities may no longer be a viable venture. Terminal operators in Nigeria – whether companies under MOMAN or Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) charge extra cost known as storage fees, aside the actual cost of product, when selling to their business-to-business customers, and this extra cost is passed on to the last-mile customers at the filling stations.
However, with Dangote now set to start supplying products directly to every marketer through their trucks and vessels, the 11Plc boss contended that marketers whose only business is tank farm operation would soon shut down due to lack of patronage.“But now that the product is made locally, there may be no need for keeping all that storage because if you don’t have the product from the refinery this week, you can get it next week.
“So, why go and pay N5 extra to the tank farm owner? If you just order from Dangote and you get your order this week or next week. You don’t need to pay any extra fee for storage. You will just go there with your 50 trucks and lift your product.‘So, it’s going to change the dynamics in the industry a lot”, Oyebanji added.
On his projection for the downstream sector for this year, the ex-MOMAN chairman said the Dangote Refinery would be a game changer.Continuing, he said the aviation fuel being produced by the refinery must be produced consistently and in sufficient quantity, saying when that happens, it would significantly affect the market this year in terms of product availability, pricing and requirement for large storage facilities. Oyebanji noted that the artificial pricing arrangement which marketers have with NNPC may change and become more reflective of the dictates of the market.“Since the product is now available locally and everybody can get it, then obviously, the competition may be tougher than what it used to be. But a lot of things depend on if the refineries work consistently and with good quality and the right quantity that can meet the demand, then that will bring about a lot of changes in the market”, he added.
Also speaking on the long-awaited commercial terms, the Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Clement Isong, said the discussions were still ongoing, stressing that the current discussions were around logistics and administration.He corroborated Oyebanji’s position that they “haven’t arrived at commercial terms yet. We are still in the process of talking about logistics and administrative things like registration. It is only when they have the products that we can begin discussion on commercial terms.”He also said that the refinery would impact tankage and tank farms as it comes with its own storage and loading arms, positing that many of the storage tanks in the country may become redundant as optimisation and efficiencies set in.
According to him, “only those people who own 100; 200; 500 filling stations will be able to keep their own storage so that they can control their own supply lines to their stations. But those other people can pick their products directly from the refinery, they do not need additional cost of secondary storage.”On his part, the immediate-past National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Mr. Chinedu Okoronkwo, said one of the things that was yet to be made public by Dangote Refinery was the mode of offtaking the products.
“Nobody knows whether the company will want to supply products to the market through its equity partner, the Nigerian National Petroleum Company Limited (NNPCL) that is supplying the crude or through an open market.“For now, let us know the modus operandi – how Dangote wants to operate. If it will be for the open market or they will produce for NNPC. You know, the crude it’s getting is from NNPC. We don’t know what will happen. So, let us not pre-empt the situation. Whatever happens is going to be a win-win situation for everybody in the sector”, Okoronkwo said.
On his part, the National President of Petroleum Retail Outlets Owners Association of Nigeria (PETROAN), Dr Billy Grillis-Harry, also confirmed that his members had been engaging with Dangote but were yet to discuss a very serious business model with them.He said aviation fuel and diesel coming out from the facility will be cheaper, insisting that his association will certainly close ranks and do business with the local refiner in a mutually-beneficial term.
The Nigerian National Petroleum Company (NNPC) Limited says it adopted a lower price benchmark for $3.3 billion crude-for-cash loan to reduce the risk of default and ensure financial stability.
The NNPC spoke on the details of the facility in a document signed by Olufemi Soneye, NNPC’s chief corporate communications officer, on Sunday.
The document is titled, ‘Frequently Asked Questions (FAQs) – Project Gazelle’.
BACKGROUND
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On August 16, 2023, the NNPC secured a $3 billion emergency crude repayment loan to support the naira and stabilise the foreign exchange (FX) market.
In January 2024, TheCable reported that Nigeria would pay an interest of 11.85 percent per annum on the $3.3 billion “pre-export finance facility” (PxF) facilitated by the NNPC Ltd and arranged by Afreximbank.
The news has garnered significant interest as the NNPC had pledged over $12 billionworth of oil– about three times more than the facility taken.
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To make the repayment, the NNPC will forward-sell 90,000 barrels per day of Nigeria’s share of offshore crude oil under the production sharing contract (PSCs) with the oil companies.
JUSTIFICATION FOR THE $65 OIL PRICE BENCHMARK
Giving details on the benchmark oil price, the NNPC said the facility, tagged, ‘Project Gazelle’ uses a conservative crude price of $65 per barrel to calculate the allocated crude to be produced and sold in the future. Brent Crude price is currently at $78.
“This provides a safety margin for price fluctuations in the future,” NNPC said.
“NNPC Limited has reserved up to 90,000 barrels of crude for Project Gazelle, ensuring sufficient cash flow for repayment and other financial obligations.
“If oil prices rise, more money will come in from selling the 90,000 barrels, allowing for faster repayment. However, if oil prices fall, the repayment may be slower.
“The quantity of crude earmarked (90,000 barrels) is sized to ensure enough cash is available for the repayment of the facility when it is due.
“This also ensures that NNPC Limited can meet other cash flow obligations, considering the expected future price of crude oil globally.”
‘LOWER CRUDE PRICE ACCOUNTS FOR VOLATILITY’
In the document, Sonoye said the lower crude price in the arrangement is due to the conservative pricing strategy that accounts for the volatility of oil prices.
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This strategy, he said, helps in reducing the risk of default and ensures financial stability.
“Oil prices are highly unpredictable, meaning prices can fluctuate up and down within any given period,” he said.
“Lenders prefer a low price for safety to ensure a limited risk of default. On the other hand, Borrowers prefer a high price to minimise pledged volumes.
“The negotiated price sits in the middle and is usually a compromise between these two interests.”
The NNPC spokesperson said a lower price estimate also accounts for these incidental costs, adding that the facility’s “small size will not significantly impact future oil earnings relative to Nigeria’s oil production”.
“This project showcases NNPC Limited’s operational autonomy and financial acumen while ensuring immediate liquidity, minimising the impact on future earnings, and potentially enhancing Nigeria’s credit rating,” the national oil firm said.
NNPCL also said repayments are strategically planned and tied to future oil sales, with conservative pricing in oil sales contracts mitigating the risks associated with oil price volatility.
The Dangote Petroleum Refinery is to supply fuel to about 150,000 retail outlets operated by the Independent Petroleum Marketers Association of Nigeria following a meeting between the management of the refinery and executives of IPMAN.
Last week Monday, The PUNCH exclusively reported that IPMAN had scheduled a meeting with the management of Dangote refinery as regards the supply of products to independent marketers.
When contacted on Friday evening to confirm if the meeting was held, the President, IPMAN, Abubakar Maigandi, stated that the association had finally met with the management of the refinery, adding that the latter agreed to supply products to the over 30,000 members of IPMAN.
This came as it was further gathered that the regulator of the downstream oil sector was currently examining the refined products from the refinery before the facility would be given approval to dispense fuel to the market.
The PUNCH had also reported on Monday that seven major oil marketers in Nigeria had registered with the refinery for the lifting and distribution of refined petroleum products produced by the $20bn plant.
The report stated that dealers under the aegis of the Major Oil Marketers Association of Nigeria confirmed on Sunday that with the registration, they would commence the distribution of fuel produced from the facility once the commercial terms were sorted.
The seven major marketers include 11 Plc, Conoil Plc, Ardova Plc, MRS Oil Nigeria Plc, OVH Energy Marketing Limited, Total Nigeria Plc and NNPC Retail.
Similarly, the Petroleum Products Retail Outlets Owners Association of Nigeria had also stated that PETROAN was engaging the management of the multi-billion dollar refinery for the supply of products from the facility.
On January 12, 2024, the Dangote Petroleum Refinery announced that it had commenced the production of Automotive Gas Oil, popularly called diesel, and JetA1 also known as aviation fuel.
Commenting on the outcome of the meeting between IPMAN and the Dangote refinery during a conversation with our correspondent on Friday, the association’s president said the management of the plant would be supplying products to the 150,000 stations of IPMAN nationwide.
“The meeting went well, so right now we are just expecting their reply in terms of products that they are going to give us. They have agreed to dispense products to IPMAN members,” Maigandi stated.
Asked to state the number of oil marketers that are members of IPMAN, he replied, “We have 30,000 members as of our last census, which was done two years ago. And they agreed to supply products to us. Also, our retail outlets are 150,000 stations across the country.”
Probed further to tell whether every member and station of IPMAN would be able to get supply from Dangote, Maigandi said, “What he (Dangote) is producing is for Nigeria’s consumption. He can supply Nigeria and can export some of the products.
“It is not a small refinery. It is a very big refinery. I was there to see things for myself and it is a massive refinery.”
When told that Dangote promised to get the products to the market in January, and whether this was realistic based, the IPMAN President stated that there was hope.
“There is hope since they have started production. Immediately when they finish production, the next thing is to sell. I can confirm this because I was there myself. And I know immediately he gets approval to sell, he can start selling at any time.
“So it is not a small project. It is a very good thing for Nigeria. They are to start with aviation fuel and diesel. You know that independent petroleum marketers also buy diesel.
“Therefore by God’s grace, our 30,000 members are ready to buy and distribute across the 150,000 retail outlets nationwide. So anywhere you go you will see fuel. The issue of scarcity of fuel will be no more once he (Dangote) starts,” Maigandi stated.
On whether IPMAN discussed pricing with the management of the refinery, he said, “No we didn’t discuss the price, but all that we know is that the price is going to be a little bit lower than what we have been selling.”
The Dangote refinery, located in Lagos, has so far received six million barrels of crude oil at its two SPMs located 25km from the shore. The first crude delivery was done on December 12, 2023, and the 6th cargo was delivered on January 8, 2024.
The refinery can load 2,900 trucks a day at its truck-loading gantries. The products from the refinery will conform to Euro V specifications, according to the firm.
The Nigerian Ports Authority (NPA) on Sunday announced the berthing of the largest container to sail on the nation’s territorial waters at the Lekki Deep Seaport.
Mr Mohammed Bello-Koko, the Managing Director, NPA confirmed this in a statement in Lagos.
According to him, the vessel measuring 367M in length, christened “Maersk Edirne”, has a breadth of 48.2 and carried a Gross Registered Tonnage of 142,131 metric tonnes.
He added that the vessel which had a Dead Weight Tonnage of 147,340 metric tonnes, constituting 3,376 total cargo onboard, was navigated to safety by the highly experienced and thoroughly equipped pilots of the NPA.
“This development validates the assurances I gave during the signing of the Presidential/Ministerial Performance Bond in December 2023.
“The authority under my watch is poised to provide the leadership and technical guidance required to maximise the potentials inherent in our marine and blue economy,” he said.
Bello-Koko while responding on the milestone, commended the Minister of Marine and Blue Economy, Mr Adegboyega Oyetola, for the consistent support and endorsement of the authority’s initiatives.
He also commended the minister for investments in employee upskilling and equipment renewal, which made the milestone seamlessly achievable.
“Before this time, the largest commercial vessels to sail on Nigerian waters were “MV Stadelhorn” and “MSC Maureen” at Onne Port and TinCan Island Port Complexes, respectively.
“Thus, the berthing of a ship measuring 367 meters at Lekki Deep Seaport, represents a quantum leap forward.
“The Lekki Deep Seaport has by this feat, in addition to its pioneering of full automation and facilitation of transhippment, proven its readiness to exceed stakeholders’ expectations,” he said.
