Lagos - Dangote Group is considering a purchase of Nigerian oilfields as foreign oil majors plan to sell onshore assets in the continent’s top crude producer.
The company, which has interests from cement to sugar, needed to secure a supply of crude oil and a “substantial amount of gas” for a $9 billion (R97.4bn) oil refinery and petrochemical complex it planned in south-west Nigeria, group executive director Devakumar Edwin said last week.
He added that the company also needed energy for its cement plants in Africa’s second-largest economy.
“We’re seriously thinking of investing in oil blocks both for gas and for oil. We’ve started talking with some companies who are divesting from onshore,” Edwin said, declining to name them.
International oil and gas explorers including Royal Dutch Shell and Chevron are selling onshore and shallow-water fields in Nigeria amid persistent violence and crude theft in the oil-rich Niger River delta, with smaller Nigerian companies taking their place.
Edwin said Dangote Group believed that it could manage unrest and aggrieved communities in the region with corporate social initiatives.
“We know the terrain much better, we know the risks and we believe that the risks can be managed. The primary risk is people blasting your pipelines. I wouldn’t like to go and invest in a block which is totally inland and then I have to start buying inland pipelines.”
Armed attacks, mainly in the delta’s swamps and shallow waters, reduced Nigeria’s oil output by 29 percent between 2006 and 2009, according to data complied by Bloomberg.
Although the violence eased after thousands of fighters accepted a government amnesty offer and disarmed five years ago, a surge in oil theft by gangs tapping crude from pipelines pushed output down to four-year lows last year. Nigeria pumped about 1.9 million barrels of crude a day last month.
The Dangote petrochemical complex will include a 400 000-barrel-a-day refinery, a 2.8 million-ton-a-year urea plant and a factory to produce polypropylene, used to make plastics. Edwin said the company planned to expand the refinery capacity by another 100 000 barrels.
Africa’s most populous nation relies on fuel imports to meet most of its needs due to mismanagement, poor maintenance and aging equipment at its four refineries. The Dangote refinery will cut fuel imports for the country in half, according to the company.
The company is controlled by Aliko Dangote, Africa’s richest man, who is joint chairman of this year’s World Economic Forum summit in Davos. His wealth has climbed $1.1bn in the month to date, making him the world’s 27th richest person with a net worth estimated at $24.9bn, according to the Bloomberg Billionaires’ Index.
Dangote Cement, Africa’s biggest producer of the building material and Nigeria’s largest company, is looking at expanding in three South American countries and has signed a preliminary joint venture agreement with one firm, according to Edwin, who is also the chief executive of the cement business.
“The countries we’re looking at have huge natural resources and growth,” he said, declining to name the nations so as not to alert competitors. “There are many large players in that region” that “may easily try to shut down entry to new players, but there’s still large scope of doing business.”
Dangote Cement, with a market capitalisation of 3.8 trillion naira (R260bn), has three plants in Nigeria and plans to expand in 13 other African countries, bringing total annual capacity to more than 50 million tons by 2016.
The company was also expanding in Asia and had signed limestone mining rights in Indonesia and Nepal, Edwin said.
Dangote Group would delay a planned listing of the cement subsidiary’s shares on the London Stock Exchange until at least next year when plants in countries including Cameroon, Senegal, Sierra Leone and Zambia were commissioned, he added.
Dangote Cement’s shares have fallen 2.2 percent this year to 225.02 naira in Lagos. The stock advanced 71 percent last year, outpacing the 47 percent gain of the Nigerian Stock Exchange all share index.
The sale of shares in London would probably happen once investors could “see us as players outside Nigeria, not just as Nigeria champions, and that we can repeat our success story elsewhere”, Edwin predicted. – Bloomberg