Ndubuisi Egwim stress-tests a $14 billion refinery project by asking what could go wrong. He identifies five risks: crude supply shortages, volatile refining margins, construction delays at massive scale, existing debt, and political interference in Nigeria's strategic oil sector.
I can imagine a different future, which takes us to number 9, which is basically what could go wrong? This is something I do with investments I like. I deliberately try to destroy my own argument so I can look at it from both sides. So instead of asking how much money could I make, or is this thing going to double or 10x in a few years, I ask how could I be wrong in my thesis, my investment thesis? Number 1, crude supply. So a refinery without crude is basically like a bakery without flour. You can't make cake, you can't make bread. Beautiful building, fantastic ovens, no flour, no bread, no cake, nothing. The refinery needs enough crude consistently at sensible economics. Margins, profits. Refining can be cyclical. Today's fantastic profit doesn't guarantee tomorrow's fantastic profit. Expansion. Doubling capacity sounds wonderful. Delivering another approximately $14 billion industrial expansion on time and on budget. It's something else. Not that easy to do. 4 is the debt. We've already covered that. I've talked about that. So let's keep along. 5 is government and regulation, especially in a place like Nigeria. This is an enormously strategic business operating in a politically important industry. Government policy matters. Regulation matters. Taxes matters. I'll leave it at that.
