Africa could compete in fuel exports, but massive investments are needed
7/5/2024 12:00:00 PM
Africa could become a refined fuel exporter, with at least two top-notch refineries due to come on stream within the next five years, but it must overcome its dire infrastructure and a funding crunch. Africa's demand for additional refining capacity is huge and expected to rise substantially over the years to come. The continent currently imports some 40% of its total demand for finished products of around 2.3 MM barrels per day (bpd), said researcher David Sineke at oil company Engen.
Sineke calculated Africa could become a net exporter now if its existing 45 refineries operated at 75% of their total 3.48 MMbpd capacity, saving billions of by cutting its dependence on European imports. "Why should we produce 8 MMbpd of crude, send it to Europe and buy back the product? That's crazy," he said. Even Angola, which rivals Nigeria as Africa's top oil producer, imports over 60% of its transport and heating fuels.
But even though demand for refined products is growing, the industry is fragmented and refineries are struggling due to bad maintenance, poor management and disinvestment by multinationals relocating to more lucrative markets such as China and India. Refineries in western Africa have a run rate of as low as 50 percent, due to production interruptions, negligence, loss of assets and political interference, analysts said.
Moreover Sub-Saharan Africa's refineries have an average size of 69,000 bpd, with some refining as little as 7,000 bpd, prompting some to argue that consolidation and cross-border projects could make its refining facilities more competitive.
"Africa requires a consolidated approach to solving the refining challenges," said Dan Marokane, vice president of operations at South Africa's state-owned PetroSA.
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