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Amid growing energy crisis and weakening economy, Africa’s perpetual reliance on importation of refined petroleum products may create long term challenges for the continent’s energy outlook, stakeholders have said.

In Nigeria, over N7 trillion is spent yearly to subsidise premium motor spirits alone as the country, which is a leading crude oil producer in Africa, has been unable to make its three refineries work. From poor storage facilities, inadequate seaports, dilapidated refineries, lack of reliable pipeline networks, and bad road/rail networks, to subsidy challenges and pricing issues, the continent’s energy crisis have held the economy by the horn against the backdrop of uncontrollable population explosion.

The Guardian had reported that about N861 billion was spent by the country, in about 26 months as freight costs for the importation of petroleum products, especially PMS totaling about 41 billion litres, as the nation’s refineries remain in comatose.

The continent has about 43 refineries with the total nameplate capacity of the refineries put at about three million barrels per day (BPD).  In Egypt, there are nine refineries (774,900 bpd); Algeria has five (303,700 bpd); Libya has five (380,000 bpd); South Africa has four (545,000); Nigeria has three refineries (445,000 bpd), while the Niger Republic recently constructed a small refinery.

The Executive Secretary of ARDA, Anibor Kragha revealed that North Africa with 17 refineries would require a capital expenditure of $5.955 billion for an upgrade, and West and Central Africa with 12 refineries would need $6.285 billion, while East and Southern Africa with seven refineries would need $3.415 billion.

ARDA had noted that there is a need for market-equivalent pricing and taxation framework if the downstream segment of the continent’s petroleum industry will attract needed investment.

Despite growing population and demand for petroleum products, Africa has remained a primary exporter of crude oil while its economy suffers from import of the white products.

Kragha, while delivering a presentation at the Oil Trading & Logistics 2023 Expo in Lagos, said the continent needed to also create a clear policy to grow security in the aspect of Liquified Petroleum Gas (LPG).

Kragha in his presentation on “Africa Refining: Regional Sufficiency and Global Energy Transition,” said there was need for coordination across the continent.

According to him, tightening and harmonisation of cleaner oil product specifications remained sacrosanct in the face of looming health and environmental dangers.

He also called for transparency and forward visibility around medium to long-term regulatory frameworks as well as coordination across key sectoral ministries to support investors’ business plans.

Even though African countries have made a lot of money from fossil fuels, they have mismanaged the resources, and are now in a fix without resources to build new or maintain existing refineries.

They are also struggling to provide electricity from fossil fuels, not to mention renewable investments.

Kragha said there was a need for the continent to invest in pan-African oil and product pipelines, stressing that Africa has only six countries with crude oil pipelines, eight with product pipelines, and six with both crude oil and product pipelines.

Oil and gas experts are already worried over the impacts of Environmental, Social, and Governance (ESG) issues on financing for oil and gas projects. They insisted that unless borrowers like Nigeria and other African oil producers quickly adapt, securing necessary funding for the sector may remain very difficult.

The Executive Director, CITAC, Elitsa Georgieva, noted the inability of Africa to meet half of its demand for Liquified Petroleum Gas, gasoline, jet A1 fuel, kerosene, gas oil, fuel oil, and others locally amidst growing population remains worrisome.

The General Manager, Refinery, Aradel Plc, Temitayo Ogunbanjo, speaking at the Oil Trading and Logistics (OTL) Africa Week in Lagos during a session on ‘African Refining: Regional Sufficiency amid Global Energy Transition,’ called on players in Africa petroleum industry to prioritise energy transition that guarantee energy security for the growing African population.

He stressed that Africa’s share of the world’s population is set to reach about 40 per cent close to 2.5 billion by the end of the century, noting that as Africa’s population grows, the demand for oil and other resources will increase.

Ogunbanjo noted that over the last 30 years, the oil and gas component of energy supplied in Africa has been more than 40 per cent.

He added that energy transition efforts must be structured in a way that allows scaling up value addition to hydrocarbon resources.

“Over 600 million Africans are without access to electricity; therefore, our hydrocarbon resources must be used for electricity access for over 70 million people every year to ensure that universal access to affordable electricity is achieved by 2030.

“Over 900 million Africans out of 2.3 billion people globally are without access to clean cooking facilities, relying instead on the traditional use of solid biomass, kerosene, or coal as their primary cooking fuel.

“Over 50 per cent of energy consumed in Africa is fueled by biofuels and waste (with Oil & Gas fuels contributing less than 40 per cent). Therefore, converting consumption from biofuels/waste to gas and oil derivatives greatly reduces CO2 emissions and helps our transition,” Ogunbanjo said.

He emphasised that as the African population grows, the demand for oil and other resources will increase, noting that the demand for crude oil in Africa as of the time of his reaction is 4.5 million barrels per day.

Offering solutions to spur economic growth, Ogunbanjo charged the continent to scale up hydrocarbon production, with intentional investment in infrastructure for value creation to balance economic growth with sustainable development and transition to clean energy.

Ogunbanjo said that his company has increased its refinery production from 1,000 barrels per day in 2010 to 11,000 bpd in 2020 with the addition of two trains of 5,000 barrels per day each capacity and an additional train to produce PMS (gasoline) is scheduled for completion and start by mid-2024.

President, Crude Oil Refiner Association of Nigeria, who doubles as the Managing Director, OPAC Refinery Limited, Momoh Oyarekhua, highlighted lack of an African crude oil index to support local production, as part of the reason Nigeria and other African oil producers are trapped as there is no discount on the crude oil that goes into the refineries.

He further urged African leaders to wean the continent off importation of fuel and massively cut down the continent’s import bill and deal with its refined product dependency by prioritising the concerns and needs of investors willing to create value out of its present huge reserve of crude oil and gas.

“Since we are not producers of crude oil, the Nigerian Government needs to intervene in our operations by encouraging the independent crude oil producers to allow us to settle the crude oil payment for our refinery in Naira.

“Our refinery is strategically established to support the government to substitute locally produced products for imported products,” he said.

He expressed his frustration over the government inability to comprehend the economics behind local refinery and local currency support.

He stressed that if Nigeria can reduce the 40 per cent foreign exchange exposure from importing and subsidising finished petroleum products, the country’s revenue and foreign exchange would be saved.

Source: https://guardian.ng/energy/why-african-oil-producers-must-prioritise-refining-energy-security/