His Excellency
Asiwaju Bola Ahmed Tinubu, GCFR
President & Commander In Chief of the Armed Forces of the Federal Republic of Nigeria
Asokoro Presidential Villa, Abuja FCT Nigeria
Wednesday 18th September 2024
CC:
(a): The Governor, Central Bank of Nigeria, CBN
(b): The Chairman, Economic & Financial Crimes Commission, EFCC
(c): The Director General, Department of State Security Service, DG-DSSS
(d): The Inspector General of Police, IGP
(e): The Honourable Attorney General of Federation and Minister of Justice HAGF-MJ
(f): Relevant FGN Authorities & Stakeholders
(g): Fellow Compatriots & Nigerians
Your Excellency
How To SELL PMS Pump Price for N350/Litre in Nigeria By Projecting the Premium Motor Spirit (PMS) & Related Crude Oil 🛢️ Fractions Pricing Per Liter With Estimated Investment Funding Cost & Capital Recovery At 9% Interest Rate Over Tenor For A Typical 600,000 Barrels Per Day Installed Capacity Crude Oil Refinery in Nigeria
A Case Study of the Dangote Refinery In Nigeria 2024, Meta AI
Comrade Engr. (Dr.) Eragbe Anslem Aphimia
(C.Reg; COA)
Managing Director Chief/Executive Officer,
MD/ CEO
CEAGIS PROPERTIES LIMITED
+234(0)803 700 9181
PART-1:
To estimate the average prices per liter for each of the crude oil fractions for a 600,000 barrels per day crude oil refining capacity in Nigeria like the Dangote Refinery 2024″
Analysis_1:
Based on 2022 averages and considering Nigeria’s market dynamics, here are estimated average prices per liter for each crude oil fraction for a 600,000 barrels per day crude oil refining capacity in Nigeria, similar to the Dangote Refinery:
A: Fractions and Estimated Prices (₦/liter)
- Gasoline (PMS): ₦350 – ₦400/liter
- Diesel (AGO): ₦450 – ₦520/liter
- Jet Fuel (ATK): ₦550 – ₦650/liter
- Fuel Oil (LSFO): ₦400 – ₦480/liter
- LPG: ₦800 – ₦1,200/kg
(approximately ₦550 – ₦825/liter) - Petrochemicals: prices vary widely depending on specific products (e.g., polypropylene, polyethylene)
B: Conversion Factors:
- Gasoline: 1 barrel = 159 liters
- Diesel: 1 barrel = 164 liters
- Jet Fuel: 1 barrel = 151 liters
- Fuel Oil: 1 barrel = 133 liters
- LPG: 1 ton = 1,215 kg ≈ 1,600 liters
[C]: Estimated Daily Production Volumes (liters):
- Gasoline: 33,150,000 liters (210,000 bbl/day * 159 liters/bbl)
- Diesel: 24,600,000 liters (150,000 bbl/day * 164 liters/bbl)
- Jet Fuel: 9,060,000 liters (60,000 bbl/day * 151 liters/bbl)
- Fuel Oil: 11,790,000 liters (90,000 bbl/day * 133 liters/bbl)
- LPG: 9,720,000 liters (30,000 tons/day * 1,600 liters/ton)
[D]: Revenue Estimation:
Using the estimated prices and daily production volumes, the refinery’s daily revenue can be calculated:
- Gasoline: ₦11.6 billion (33,150,000 liters * ₦350/liter)
- Diesel: ₦12.7 billion (24,600,000 liters * ₦520/liter)
- Jet Fuel: ₦6.3 billion (9,060,000 liters * ₦650/liter)
- Fuel Oil: ₦5.1 billion (11,790,000 liters * ₦430/liter)
- LPG: ₦8.8 billion (9,720,000 liters * ₦900/liter)
Total daily revenue: ₦44.5 billion
Please note that these estimates are based on 2022 averages and may vary depending on market dynamics, global crude oil prices, and other factors.
PART-2
To estimate time frame for Investment Capital Recovery At 9% Annual Interest Rate to recoup investment for a 600,000 barrels per day crude oil refining capacity using all the crude oil fractions available in their percentages and estimated pricing as the basis for capital investment recovery using all fractions prices averages in Nigeria
Analysis-2:
To estimate the investment capital recovery timeframe, we’ll consider:
[2A]:
- Total Investment: $19.5 billion – $25 billion (using the lower end for calculations)
- Annual Interest Rate: 9%
- Refinery Capacity: 600,000 barrels per day
- Crude Oil Fractions and Estimated Pricing in Nigeria (2022 averages):
[2B]:
| Fraction | Percentage | Price ($/bbl) |
|---|---|---|
| Gasoline (PMS) | 35% | 85 |
| Diesel (AGO) | 25% | 100 |
| Jet Fuel (ATK) | 10% | 120 |
| Fuel Oil (LSFO) | 15% | 90 |
| LPG | 5% | 550 (per ton) |
| Petrochemicals | 10% | 1,000 (per ton) |
DAILY REVENUE:
- Gasoline: 210,000 bbl/day * $85/bbl = $17.85 million
- Diesel: 150,000 bbl/day * $100/bbl = $15 million
- Jet Fuel: 60,000 bbl/day * $120/bbl = $7.2 million
- Fuel Oil: 90,000 bbl/day * $90/bbl = $8.1 million
- LPG: 30,000 tons/day * $550/ton = $16.5 million
- Petrochemicals: 60,000 tons/day * $1,000/ton = $60 million
- Total Daily Revenue: $124.6 million
[2D]: ANNUAL REVENUE:
- Total Annual Revenue: $124.6 million * 365 days = $4.545 billion
[2E]: ANNUAL PROFIT:
- Assume 20% net profit margin (typical for integrated refineries): $909 million
- Interest Expense (9% of $19.5 billion): $1.755 billion
- Net Annual Profit: $909 million – $1.755 billion = -$846 million (initial years)
[2F]: INVESTMENT CAPITAL RECOVERY:
- Simple Payback Period: $19.5 billion / $909 million = 21.5 years
- Discounted Cash Flow (DCF) Analysis (using 9% discount rate):
- Net Present Value (NPV): $6.43 billion
- Internal Rate of Return (IRR): 12.1%
- Payback Period: 18 years
[2G]: SENSITIVITY ANALYSIS:
| Crude Oil Price ($/bbl) | Annual Revenue | Payback Period |
|---|---|---|
| 50 | $3.59 billion | 25 years |
| 60 | $4.31 billion | 20 years |
| 70 | $5.03 billion | 17 years |
| 80 | $5.75 billion | 15 years |
Based on these estimates, the investment capital recovery timeframe for a 600,000 barrels per day crude oil refining capacity in Nigeria, utilizing all crude oil fractions, is approximately:
(a): – 18 years (using DCF analysis)
(b): – 21.5 years (using simple payback period)
(c): This calculation assumes a stable market, constant sales prices, and 90% refinery utilization.
PART-3:
To estimate the time frame for Investment Capital Recovery at 9% Annual Interest Rate to Recoup Investment for a 600,000 barrels per day crude oil refining capacity assuming a typical fifty million (50,000,000) liter per day PSM consumption is the basis for Capital Investment Recovery using N350/litre sales price in Nigeria
Analysis_3:
To estimate the investment capital recovery timeframe, we’ll consider:
[3A]:
- Total Investment: $19.5 billion – $25 billion (using the lower end for calculations)
- Annual Interest Rate: 9%
- Daily PMS Consumption: 50,000,000 liters
- Sales Price: ₦350/liter
- Average Annual Refinery Utilization: 90% (accounting for maintenance and downtime)
ANNUAL REVENUE:
- Daily Revenue: 50,000,000 liters * ₦350/liter = ₦17.5 billion
- Annual Revenue: ₦17.5 billion * 365 days = ₦6.387 trillion
- Convert to USD (using ₦450/$): $14.19 billion
- Convert to USD (using ₦1650/$): $3.87 billion (2024) inflationary trends
[3C]: ANNUAL PROFIT:
- Assume 15% net profit margin (typical for refineries): $2.13 billion /$580 million at 2024 devaluation rates
- Interest Expense (9% of $19.5 billion): $1.755 billion
- Net Annual Profit: $2.13 billion – $1.755 billion = $375 million
[3D]: INVESTMENT CAPITAL RECOVERY:
- Simple Payback Period: $19.5 billion / $375 million = 52 years
- Discounted Cash Flow (DCF) Analysis (using 9% discount rate): (a): – Net Present Value (NPV): $4.37 billion
- Internal Rate of Return (IRR): 10.3%
- Payback Period: 45 years
[3D]: SENSITIVITY ANALYSIS
| Sales Price (₦/liter) | Annual Revenue | Payback Period |
|---|---|---|
| 300 | $12.34 billion | 57 years |
| 350 | $14.19 billion | 45 years |
| 400 | $16.04 billion | 38 years |
Based on these estimates, the investment capital recovery timeframe for a 600,000 barrels per day crude oil refining capacity in Nigeria using PMS only as basis for investment recovery is approximately:
- 45 years (using DCF analysis)
- 52 years (using simple payback period)
[3F]: This calculation assumes a stable market, constant sales price, and 90% refinery utilization.
PART_4:
Can a refinery give PMS free and be able to recover costs and still make profits from other crude oil products ?
Analysis_4:
Yes, it’s theoretically possible for a refinery to give Premium Motor Spirit (PMS), also known as gasoline, away for free and still recover costs and make profits from other crude oil products. Here’s how:
- Refinery produces various petroleum products from crude oil, such as:
- PMS (gasoline)
- Diesel
- Jet Fuel
- Fuel Oil
- LPG
- Petrochemicals
- Refinery sells PMS at zero profit or even at a loss (free).
- Refinery generates revenue and profits from other high-margin products, such as:
- Diesel (higher demand and better margins)
- Jet Fuel (high-demand, high-margin)
- Petrochemicals (specialty products with
high margins)
- Refinery optimizes production processes to minimize costs and maximize efficiency.
- Refinery benefits from economies of scale, reducing costs per unit.
B: KEY FACTORS TO CONSIDER:
- Crude oil pricing: Refinery’s cost of crude oil affects overall profitability.
- Product yield: Refinery’s ability to produce high-value products from crude oil.
- Market demand: Balance between supply and demand for various products.
- Competition: Refinery’s market position and competition from other refineries.
- Government regulations: Taxes, subsidies, or price controls can impact profitability.
[C]: REAL-WORLD EXAMPLES
Some oil-rich countries, like Saudi Arabia, have subsidized fuel prices, effectively selling PMS at below market rates or even giving it away for free to citizens. However, they compensate for the loss by generating revenue from other oil exports.
In other cases, refineries might engage in “price discrimination,” where they sell PMS at a loss to captive markets (e.g., internal consumption) while generating profits from exports or sales of other products.
[C]: CHALLENGES AND LIMITATIONS
- Sustainability: Continuous losses on PMS sales might not be sustainable.
- Market fluctuations: Changes in global oil prices, demand, or supply can impact refinery profitability.
- Regulatory risks: Government policies or taxes can alter refinery economics.
[D]: TO MAINTAIN PROFITABILITY, REFINERIES would need to:
- Continuously optimize operations and reduce costs.
- Diversify product offerings to maintain revenue streams.
- Monitor market trends and adjust strategies accordingly.
Keep in mind that this is a simplified analysis, and actual refinery operations involve many more complexities.
PART_5:
A typical PMS pricing scenario per liter in Nigeria using 600,000 barrels per day crude oil refining installed capacity like the Dangote Refinery
Analysis_5:
Here’s a simplified PMS pricing scenario for Nigeria, assuming the Dangote Refinery’s 600,000 barrels per day (bpd) installed capacity:
- Crude oil price: $60/bbl (average 2022 price)
- Refinery efficiency: 90% (industry average)
- PMS yield: 35% of total refinery output (typical for Nigerian refineries)
- Local demand: 50 million liters/day (conservative estimate)
- Fuel subsidy: None (assuming full deregulation)
- Taxes: 5% VAT, 10% excise duty (Nigerian government rates)
- Distribution and marketing costs: ₦5/liter (estimated)
- Total crude oil processed: 600,000 bpd
- Total refinery output: 540,000 bpd (90% efficiency)
- PMS production: 189,000 bpd (35% yield)
- Daily PMS output (liters): 71,820,000 liters (189,000 bpd * 380 liters/bbl)
- Local PMS demand: 50,000,000 liters/day
[C]: PMS PRICING BREAKDOWN
- Crude oil cost: ₦153.6/liter ($0.42/liter, using $60/bbl and 380 liters/bbl)
- Refining cost: ₦30/liter (estimated)
- Distribution and marketing: ₦5/liter
- Taxes (VAT + excise): ₦14.5/liter
(5% VAT + 10% excise) - Total cost: ₦203.1/liter
[D]: POSSIBLE PMS PRICE RANGE
- Competitive price: ₦210 – ₦230/liter (including profit margin)
- Government-regulated price: ₦185 – ₦200/liter (subsidized)
- International benchmark: ₦250 – ₦280/liter (without subsidy)
Please note that this is a simplified scenario, and actual prices may vary due to:
- Global crude oil price fluctuations
- Changes in local demand and supply
- Government policies and regulations
- Refinery operational efficiency
- Competition among marketers and distributors
Keep in mind that this analysis serves as a rough estimate and should not be taken as investment advice.
PART_6:
To estimated the cost in $USD investment funding to fully install a 600,000 barrels per day crude oil refining capacity like the Dangote Refinery in Nigeria in 2024
Analysis_6:
Estimating the cost of installing a 600,000 barrels per day (bpd) crude oil refining capacity, similar to the Dangote Refinery in Nigeria, requires considering various factors, including:
- Technology and process complexity
- Location and logistics
- Material and labor costs
- Engineering, procurement, and construction (EPC) costs
- Project financing and contingency funds
Based on industry reports, here’s a rough breakdown of the estimated costs:
A: Total Estimated Cost: $19.5 billion – $25 billion
- EPC Costs: $12 billion – $15 billion
- Engineering: $1.5 billion – $2 billion
- Procurement: $4 billion – $5 billion
- Construction: $6.5 billion – $8 billion
- Technology and Licensing: $1.5 billion – $2.5 billion
- Land Acquisition and Site Preparation: $500 million – $1 billion
- Infrastructure Development: $1 billion – $2 billion (roads, utilities, storage)
- Project Financing and Contingency Funds: $2 billion – $3.5 billion
- Other Costs (Permits, Training, etc.):
$500 million – $1 billion
[C]: COMPARATIVE ANALYSIS
The estimated cost of the Dangote Refinery, which has a similar capacity, was around $15 billion in 2016. However, considering inflation, exchange rate fluctuations, and changes in global market conditions, the estimated cost has increased.
[D]: KEY FACTORS INFLUENCING COSTS:
- Location (Nigeria’s unique challenges, such as security and logistics)
- Technology and process complexity (e.g., integration with petrochemicals)
- Global market conditions (e.g., steel prices, equipment costs)
- Project financing and interest rates
- Regulatory requirements and compliance
Assuming a 2024 start date, the project timeline could be:
- Feasibility studies and design: 6-12 months
- EPC contracting and procurement: 12-18 months
- Construction and installation: 36-48 months
- Commissioning and testing: 6-12 months
- Commercial operations: 2028-2030
Keep in mind that this is a rough estimate, and actual costs may vary due to various factors.
Thank you
Comr. Engr. (Dr.) Eragbe Anslem Aphimia
(C Reg; COA)
Managing Director Chief/Executive Officer
0803 700 9181
For
CEAGIS PROPERTIES LIMITED
No.40 Danube Street off IBB Boulevard Maitama District Abuja FCT Nigeria
Projects website
https://www.ceagisproperties.com
Email
ceagispropertieslimited@yahoo.com
ceagispropertieslimited@gmail.com
info@ceagisproperties.com
