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Friday, January 27, 2023

Dangote Refinery Valuation to Soar Past $13.8bn on Completion

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The Dangote Refinery valuation is set to soar once completed next year as the European Union seeks alternative supplies of refined products, due to the sanctions slapped on Russian fuels like diesel.

The Nigerian National Petroleum Corporation (NNPCL) in 2021 took a 20% stake worth $2.76 billion in the Dangote refinery Project valuing the refinery at $13.8 billion then.

The refinery project is a future cash cow for  Dangote Industries Limited (DIL). Once operational, Fitch expects the project to contribute around $1 billion to EBITDA annually when ramped up from 2024.

The Dangote refinery being built in Nigeria by Africa’s richest person, Aliko Dangote, in the outskirts of Lagos, will finally start operations by mid-2023, according to the state oil company NNPCL.

Dangote refinery once operational will convert crude oil, sourced from around the globe, into various products such as gasoline, kerosene/Jet fuel, diesel, propane/LPG, Polypropylene, and other value added fuels.

Post completion, the refinery will become the dominant fuel supplier in Nigeria, with the ability to export to other parts of Africa, Europe and South America.

It’s relatively high Nelson complexity index of 9.5 results from its capability to refine crude into mostly high value products, providing it a strong competitive edge against older refineries in Europe.

As a result, higher Refining margins are expected to boost Dangote Refinery valuations above industry averages, with oil products cracks expanding, due to a tight market.

Oil products cracks are the difference between the price of crude oil and petroleum products extracted from it.

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