In the foreseeable future, volume consuming nations like Nigeria and indeed other African countries will remain major importers of refined products due to the lack of new refining projects on the continent.
The executive secretary of the African Refiners and Distributors Association (ARDA), Anibor Kragha, said this in an interview with S&P Global Commodity Insights.
Because our demand in Africa is going to grow so much, we’re still going to have a shortfall, he said.
Major refining projects due to come on stream include the Dangote refinery in Nigeria with a planned capacity of 650,000 b/d and Cabinda in Angola with capacity of 60,000 b/d.
Kragha said, he expected phase one of the Dangote refinery to come on stream in the first quarter of 2024 at the latest and phase one of the Cabinda refinery by the end of 2024.
“So that would definitely be a boon for energy security for the continent because we would definitely reduce the imports to the continent, but we still need more refining capacity,” he said.
A senior Dangote executive who is overseeing the refinery, Devakumar Edwin, told S&P Global in a recent interview that it would start up in October at 370,000 b/d and begin ramping up to full capacity in Q4 2023.
Kragha said, ARDA also supported other projects, including the Tema refinery in Ghana coming back on stream to further help security of supply in the region.
Total African refined product imports have been stable at around 2.3 million b/d in recent months, according to S&P Global Commodities at Sea data.
Beyond refining capacity, Kragha said there needed to be a strategic discussion on storage and distribution assets in Africa, and which projects should receive investment.
“As a perfect example, if you have a deepwater port in Africa that is 14 meters depth or larger, you save $15/mt on importing products because you can bring larger vessels in. When you start to look at countries like Nigeria with huge imports you start to see where you can make savings,” Kragha said.
He pointed to refineries closing in South Africa at a time when neighboring Namibia has discovered major crude reserves as indicative of issues that need to be addressed in conversations about strategy.
Market instability in Africa is also an issue facing refiners and governments, he said. In Nigeria domestic petrol prices recently skyrocketed following the removal of costly subsidies on imported gasoline.
Kragha said, removal of the subsidy means that it is now clear what real fuel consumption is in Nigeria, ending a booming illicit petrol market in nearby countries like Togo, Benin and Niger where unscrupulous businesses allegedly sold subsidized Nigerian fuel.
“There was definitely incentive arbitrage given that the pricing in Nigeria was significantly lower than in neighboring countries. Now that it’s normalized neighboring markets are having to face the reality that there’s no cheap fuel supply anywhere,” he said.
African officials are also looking to include cleaner fuels in development plans for future processing capacity.
Kragha said, ways to do this include improving fuel standards, ensuring environmental, social and corporate governance is included in development plans, and making financing contingent on this.
“The bright spots we have are places like Cote D’Ivoire, places like North Africa, like Egypt that are trying to actually, one, maintain production capacity, and more importantly, to upgrade facilities to produce cleaner fuel,” he said.
ARDA has established a refining and specifications working group, which worked with the Societe Ivoirienne de Raffinage (SIR) refinery in Cote d’Ivoire.
“We have done a baseline study of the carbon emissions of the refinery and identified projects to reduce the carbon footprint of the refinery by 29%…those are the kind of things that we’re trying to promote to demonstrate opportunities for decarbonization, particularly of Scope 1 emissions within refineries on the continent,” Kragha said.
We’ve got the edge. Get real-time reports, breaking scoops, and exclusive angles delivered straight to your phone. Don’t settle for stale news. Join LEADERSHIP NEWS on WhatsApp for 24/7 updates →
Join Our WhatsApp Channel
