Did Dangote Refinery defraud Nigeria by selling 20% stake to NNPC at $2.76B?

Dangote

Aliko Dangote's refinery project

When the Nigerian government last year gave NNPC the approval to buy 20 per cent stake in Dangote Refinery at $2.76 billion, the announcement was greeted with suspicions by some Nigerians.

Some Nigerians openly charged that the deal was fraudulent and that the NNPC overpaid for the 20 percent value of the 650,000 barrels a day refinery, the second biggest in the world.

The immediate trigger of the scepticism was the contemporaneous news that Holly Frontier Corp in the United States was acquiring the assets of Sinclair Oil for $2.6 billion.

Sinclair Oil according to the initial erroneous reports had refineries with combined 678,000 barrels capacity.

Uwagbale Edward-Ekpu who fired the first shot of disbelief wrote on 7 August:

“3 Aug 2021: HollyFrontier Corp will pay $2.6B for Sinclair Oil’s assets compromising 7 complex refineries with crude oil processing capacity of 678,000 barrels/day in the US.

“4 Aug 2021: NNPC will pay $2.76B for 20% stake in Dangote’s 650,000 barrels/day capacity oil refinery.”

As P.M.News found out, he got his facts mixed up.

Sinclair Oil has two ageing refineries. One based in Wyoming and which opened in 1924 in the Rocky Mountain region has a capacity for 85,000 barrels a day.

The second refinery based in Casper Wyoming, which began operation in 1923, has a capacity for 30,000 barrels.

What Holy Frontier is paying for goes beyond the two old refineries.

As part of the deal, HollyFrontier will buy Sinclair’s branded marketing unit and renewable diesel unit.

Holly Energy Partners, HollyFrontier’s transportation business, will buy Sinclair’s 1,200 miles of pipeline assets and storage terminals with around 4.5 million barrels of capacity.

The pipeline and storage businesses are estimated to be worth around $758 million in cash and stock.

Sinclair stockholders will own about 16.6% of Holly Energy Partners on completion of the deal.

On its part, Holly Frontiers brought into the business deal five refineries with the following capacity:

*Artesia, NM – 100,000 bpd.

The Navajo Refinery is located in Artesia, New Mexico and has a crude oil capacity of 100,000 barrels per day

*Cheyenne, WY – 52,000 bpd. …

*El Dorado, KS – 135,000 bpd. …

*Tulsa, OK – 125,000 bpd. …

*Woods Cross, UT – 45,000 bpd.

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In addition, Holly Frontiers said as far back as May last year that it planned to buy an Anacortes, Washington refinery from Royal Dutch Shell Plc by the end of 2021 for about $500 million.

It did pick the refinery which has a capacity for 120,000 barrels a day.

The business combination will give Holly Frontier refinery capacity of at least 644,000 barrels a day from eight refineries.

Doubts died down last year about the NNPC-Dangote deal.

But they resurfaced again few days ago, triggered by Afrobeat musician, Seun Kuti.

He claimed in a video post that the NNPC-Dangote deal was a fraud, relying once again on the discredited information on Sinclair Oil-Holly Frontier deal.

Seun alleged that Aliko staged a 419 deal against Nigeria, using the Yoruba word ‘Gbajue’, which means swindler.

The video on TikTok was shared by filmaker, Ijeoma Richards on Facebook:

Our Conclusion: No fraud is suspected in the NNPC deal with Dangote refinery. The $2.76 billion paid for the shares, was a fair deal.

Epilogue: Holly Frontiers and Sinclair Oil completed their business combination with an announcement on 14 March.

The two companies have fused into a new vehicle HF Sinclair Corporation. Commencing at market open on March 15, 2022, HF Sinclair will replace HollyFrontier as the public company trading on the New York Stock Exchange, and will trade under the ticker symbol “DINO” and under the new CUSIP number 403949 100.

HF Sinclair will be the parent company of a leading integrated downstream petroleum and renewable fuels company with enhanced scale and a strong marketing presence featuring:

An expanded refining business that includes seven complex refineries across the Mid Continent Southwest, Rocky Mountain and Pacific Northwest that convert discounted, heavy and sour crudes into a high percentage of gasoline, diesel and other high value refined products.

A growing renewables business with three production facilities that are expected to produce approximately 380 million gallons of renewable diesel annually.

A multi-national lubricants business that produces specialty products and base oils, marketed under the Petro-Canada Lubricants, Sonneborn, Red Giant Oil and HollyFrontier Specialty Products brands.

A leading marketing business, featuring the Sinclair brand and comprising 300-plus distributors and more than 1,300 independent wholesale branded sites located across 30 states.

An expansive logistics business under HEP with an integrated logistics network connecting key crude and product regions and interests in strategic joint ventures that provide access to finished product pipelines and storage.

Across its businesses, HF Sinclair will build on its legacy companies’ ongoing ESG efforts with increased renewables scale, a shared commitment to health and safety practices that best serve employees and communities, and a focus on risk management.

“The completion of our transactions and the launch of HF Sinclair marks the start of the next phase of our Company’s history,” said Mike Jennings, Chief Executive Officer of HF Sinclair and HEP.

“We are moving forward as a more diverse, downward integrated business with scale that is positioned to drive growth and capital returns to our shareholders.

“We are also optimistic about the significantly expanded scale of HEP, which will benefit from long-term commitments from HF Sinclair.

“I am honored to welcome the talented Sinclair team to our organizations and I look forward to working closely with them to capture the significant growth and value-creation opportunities ahead at both HF Sinclair and HEP.”

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