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An Assessment Of Dangote’s Oil Refining Plans

The information that Alhaji Aliko Dangote, the richest man in Africa has determined to take the bull by the horns and make investments in the dangerous oil refining business can only be met with an optimistic response. Especially from greater than ninety% of the Nigerian populace who’ve recently been made to bear the brunt of excessive gas costs due to the controversial elimination of subsidy on imported petrol merchandise.

Dangote is already an accomplished businessman jf petroleum machinery houston tx center with a variety of monetary muscle; and albeit the jury continues to be out on his shut relationship with the current and past governments coupled with his capability to ruthlessly monopolize the industries he invests in, we can’t totally disregard his contribution to the Nigerian financial system within the areas of job creation and the availability of locally produced commodities with out us having to depend on imported substitutes. In the world of competition, we merely can’t blame him for the indicators of monopoly we find in his areas of business curiosity, the accountability lies with the government whose accountability is to protect the curiosity and welfare of shoppers by promoting competition and stop the abuse of monopoly energy.

The Nigerian billionaire plans to build an $eight billion refinery that can produce 400,000 barrels per day by the tip of 2016. Currently, we are solely ready to provide below the 445,000 barrel per day mark by means of the combined efforts of our four refineries in Port Harcourt, Kaduna and Warri. Nonetheless, the EIA states that the operational capacity of those 4 refineries averaged only 24% in 2011. In line with OPEC, our native oil consumption stands at 267,000 barrels per day which implies that the proposed refinery may have the capability to cater for our domestic consumption wants and also have substantial surplus to export to neighboring countries.

Obviously, this isn’t bearing in mind the plans by the federal government to assemble three Greenfield refineries in Lagos, Kogi ad Bayelsa to be in operation by 2017 and the refurbishment of the existing infrastructure. If we’re able to get this right, Nigeria can simply become a internet exporter of refined petroleum merchandise in ten years. That’s however an enormous “if” considering the myriad of factors presently plaguing the business.

Potential benefits to the Nigerian Economy
Refineries are costly to maintain, they require top class administration within the palms of skilled professionals who are conscious of the numerous operational and monetary risks encountered of their day after day operating. This is the place we’re failing and it has supplied the correct platform for saboteurs to ensure none of the prevailing refineries work at full capacity. This has led the country to rely closely on importing refined petroleum products; a transfer which has been highly helpful to a couple sturdy parties.

Breaking the Jinx
If Dangote can efficiently pull this off, it’s going to immediately quell the myth that we will never get our refineries working at full capacity or that we won’t refine one hundred% of the oil we want for domestic consumption. As many stakeholders have argued, this will even strengthen the fact that the private sector has a key role to play in fixing key macroeconomic issues within the country.

Competitors
Few fingers can compete with Dangote in his commodity refining and importation enterprise industries which he has efficiently ended up monopolizing. Nonetheless, the oil and gasoline sector is a distinct ball recreation as there are a lot of skilled personnel and fascinated parties within the sector who can even come together as formidable forces. They even have technical expertise and monetary wherewithal to draw and partner with foreign traders in investing in petroleum refining in the nation. The burgeoning host of indigenous power firms within the country shall be looking to leverage on the refining business if this transfer pulls by means of. In accordance with Forbes, Nigerian Abdul-Samad Rabiu is already constructing a $500 million cement plant in Edo state to rival Dangote cement. This offers us a trace of how successful and extremely lucrative companies can encourage competitors which will routinely lead to job creation.

Cost effectiveness and Job creation
This growth has the potential of benefitting from economies of scale given the proposed capacity of the refinery. Depending on how regulation and other components work out, we may find ourselves refining oil at a a lot cheaper charge which will put a serious dent to the prospect of importing petrol from overseas refineries. If the constituted authorities could be muster the courage to support this, this might spell the tip of an era of huge corruption and rent looking for habits witnessed by the events benefiting from the importation of refined petroleum products. With extra transparency, this can even finally lead to the discount in pump costs in the long run if we consider how we can be eliminating the transportation price of exporting the crude and importing the finished product which is a key part of the pricing mannequin. As this could drive the creation of another worthwhile and fascinating business in Nigeria, we must be taking a look at prospects of job creation and acquisition of key talent sets and competencies on this important area of the downstream sector. It has already been mooted that over 2,000 jobs will be created and this quantity can only develop through potential spin-offs and additional funding.

Challenges
We are eagerly waiting to see how the Nigerian authorities will react to this improvement given its failure to solve the issues plaguing our present oil refineries for many years now costing the nation trillions of naira. A whole lot of Nigerians will probably be keeping tabs on this improvement and it’s logical to suggest that giving his cordial relationship with the federal government, Dangote would possibly simply be the man to open the flood gates and assist reduce the bottlenecks associated with licensing and different regulatory requirements. It’s going to also be fascinating to see how the oil importers and energy brokers will respond to this contemplating the may of the opposition they jf petroleum machinery houston tx center are going to be dealing with this time. Dangote has all of the ingredients to outlive this battle as he has mates in excessive places and in addition knows his politics in a volatile enterprise atmosphere like Nigeria.

Pricing will even be an attention-grabbing difficulty because the initial value outlay of this project and other elements may prevent us from instantly benefitting from a diminished pump worth. It can even be interesting to see the function the NNPC will play considering its affiliation with the International Oil Companies in the world of provide and also the PPPRA when it comes to setting costs. The next 5 years can be an fascinating one. Fingers crossed.