After decades of lull in petroleum products refining, Nigeria is keying into initiative being advanced by the African Refiners & Distribution Association, (ARDA), to prioritise development and revival of Africa’s near moribund refinery industry.
At the opening of the 2023 ARDA week conference which ran from 13-17 March in Cape Town, Executive Secretary of the African Refiners & Distribution Association (ARDA), Anibor Kragha, declared that Africa needs to prioritize the development of refineries to ensure the maximal exploitation of local resources to achieve energy security.
Kragha delivered his presentation under the theme: ‘Balancing Energy Transition and Energy Security for the African Downstream.’
In his presentation, Kragha provided insight into how the African continent can maximise the development and exploitation of its energy resources to achieve energy security while at the same time ensuring the energy transition is just and inclusive for the entire population.
Kragha explored how issues such as the Russian-Ukraine conflict and energy transition related policies have highlighted the need for Africa to prioritise downstream investments and infrastructure development to address critical energy issues such as growing demand and rising energy poverty. According to Kraghar, what the Russian-Ukraine conflict has shown is a need for short-term interventions to address the energy crisis alongside mid- to -long-term goals of an energy transition.
“What is driving us as ARDA, despite what happened globally, is that energy demand will grow through 2040 due to population growth and industrialisation across Africa,” Kragha shared.
Kragha highlighted the vital need for the continent to balance the energy transition with security, stating that “Energy security is the short term priority we have. We are not the biggest polluter in the world, hence we are focusing more on uninterrupted, secure and affordable supply of energy.”
While Africa’s energy demand continues to grow significantly with the continent set to become the world’s largest buyer of refined petroleum products, Kragha spoke of the need for the continent to attract new investments to modernize existing projects and accelerate the pace at which the continent is developing ongoing projects.
“Storage and distribution infrastructure including pipeline and storage should be a focus. We cannot have the dialogue about refineries without storage,” stated Kragha.
With a lack of adequate investments hindering the growth of Africa’s downstream industry, Kragha commented on the various mechanisms being implemented and adopted by ARDA to support the development of downstream infrastructure. He stated that, “We want to make sure we have a finance plan to ensure projects are bankable. We want to engage with Afreximbank and the Africa Finance Corporation to ensure our members are able to be financed to produce cleaner fuels and the development of storage and distribution.
“We are also developing a Liquefied Petroleum Gas Sector Development Fund with Standard Bank and other multilaterals to ensure the use of gas is optimized by our members to address local energy needs,” added Kragha.
Meanwhile, while Africa is prioritising addressing increases in energy demand, Kragha emphasised that risks of heightened pollution will introduce new threats for economies, unless countries adopt cleaner fossil fuels.
According to Kragha, “Africa’s growing demand must be met with cleaner fossil fuels. With fossil fuels set to continue to account for 60 per cent of the demand, ARDA will continue to promote the exchange of best practices on energy sustainability among our members as well as champion investments across the downstream industry.”
While other blocs including Europe are prioritising energy decarbonisation, Kragha emphasised the importance for Africa to exploit its fossil fuel resources, which remain largely untapped, to be able to become a globally competitive economic zone and energy industry.
“We are not the biggest polluter in the world. Europe contributes the most emissions and Africa has only contributed 2.7 per cent.
“If Africa is to execute all of its gas projects, there won’t be any heavy impact on global emissions. There is no one size fits for in energy sustainability and we need a just transition.”
However, Kragha emphasised that despite being the lowest emitter, Africa must continue to decarbonise its energy industry, stating that, “We need to demonstrate that we can deliver carbon credits across the downstream. What must Africa must do on a decade-by-decade basis is to decarbonise. By 2030 we need cleaner transport, clean cooking and power solutions.”
All this and more will be further unpacked during the 2023 edition of the African Energy Week, (AEW) conference and exhibition, Africa’s premier event for the oil and gas industry. Under a mandate of making energy poverty history by 2030, AEW 2023 will connect investors and project developers with African policymakers, generating new capital for Africa’s burgeoning downstream sector.
The AEW 2023 is the African Energy Chamber’s annual energy conference, taking place in Cape Town from October 16-20.
NNPCL’s Deployment Strategies
The Nigerian National Petroleum Company Limited (NNPCL), in a deliberate step to turn Nigeria into Africa’s refining hub said about $32.6 billion investment is required to overhaul refineries, pipelines and critical downstream infrastructure.
Speaking in Cape Town, South Africa at the ARDA conference, Group Executive Director, of the Nigerian National Petroleum Company, NNPC Limited Downstream, Adeyemi Adetunji, who disclosed plans to co-locate an African Refinery around the Port Harcourt Refinery and a condensate refinery, said combined capacity of NNPC related refinery would hit 1.27 million barrels per day of crude processing.
Adetunji said overhaul of the refinery is a priority of the company and would be ready in the second quarter of the year.
This developer follows the contract for the overhaul of the Kaduna refinery awarded to Daewoo Engineering Nigeria Limited at an estimated maximum cost ceiling of $740,669,600.00, with a duration of 21 months.
In March 2021, the federal government approved $1.5 billion for the overhaul of Port Harcourt oil refinery as NNPCL later awarded the contract to Italy’s Tecnimont.
Adetunji stressed the need to improve refining capacity in Africa along growing demand.
“We are on a journey of renewal and growth. The plan is to revive the existing refineries, make them functional and grow our supply capacity. In the next couple of years, this will grow to about 1.27 million barrels per day throughput for all the refineries, including the much-celebrated Dangote Refinery.
“We have another project that’s been developed now and at an advanced stage called the Africa refinery, which will be co-located at the Port Harcourt Refinery,” he said.
While NNPCL acquired a 20 per cent stake in Dangote’s oil refinery for $2.76 billion, the Warri Refinery with installed capacities of 125,000 bbl/d is under rehabilitation.
Nigeria’s economy is badly affected by insufficient and or near lack of local refining and the country has in less than two years, spent above N10 trillion on subsidising petrol under its subsidy regime.
Adetunji called for a regional connected pipelines and depots networks, as a starter for refinery investment in Africa and then a pan African connected networks.
He equally pushed for refineries products consolidation to ensure balanced output based on aggregate demand in the continent, adding that harmonisation of laws, regulations, policies and tariffs were needed to facilitate intra Africa flow of products (hydrocarbon taxes, Africa Free Trade Agreement, implementation of Afri fuels standards, etc)
Adetunji said there was a need for the continent to support the African Energy Bank, as Africa Energy Strategy, will include both existing and clean fuels.
Kragha, in his earlier submission gave reasons fo a scale up energy security through the exploitation of the continent’s entire energy resource base.
According to him, rehabilitation of the continent’s refineries, which the association said would cost over $15 billion, must be a priority to ensure continuous exploitation of resources instead of depending on import of petroleum products.
If properly harnessed, Kragha said the continent would be able to balance rising population with energy needs and on a long-term transit to cleaner energy sources.
“What is driving us as ARDA, despite what happened globally, is that energy demand will grow through 2040 due to population growth and industrialisation across Africa.
“Energy security is the short term priority we have. We are not the biggest polluter in the world; hence we are focusing more on uninterrupted, secure and affordable supply of energy.
“Storage and distribution infrastructure including pipeline and storage should be a focus. We cannot have a dialogue about refineries without storage,” Kragha said.
