Africa: More Oil Refineries Needed to Satisfy Local Oil Production

Increasing demand for petroleum products has led to refineries in Africa not to be able to satisfy the level of demand while much rely on imports to meet the deficit. This existing challenge has led the Centurion Law Group to examine the immediate status of the Africa Refinery sector and how private investors can benefit while solving the challenge of rising demands.

The  Knowledge Series analysis which was crafted by Adaku Ufere, the Energy Practice Leader and Senior Associate Attorney at Centurion Law Group’s Malabo office, depicts that refining oil in African countries will have a great benefit to the petroleum sector. According to the report, if crude oil were refined in-country then export charges, import charges and subsidy payments could be re-directed to more pressing projects.

Africa has been announced by the IEA as the world’s fastest growing oil consumer with a consumption of 4.5 million barrels per day by 2018 but in the phase of this growth, the continent’s refinery sector is weak and far from growth. Vast of oil producers in Africa depend on fuel importation to cater for deficits in their production. This existing challenge and also the growth of the continent in oil demand should bring forth an environment to enhance the development of new refineries.

Data on oil production in Africa reveals Egypt has most oil refineries in Africa – the country has nine refineries and is the continents fourth largest producer of oil. Comparing Egypt who produces 723,000 barrels per day to Angola produces 1.8 million barrels of oil per day, and Nigeria who also has a daily production rate of 2.4 million barrels per day in 2015, Angola has just one refinery while Nigeria, the largest oil producer in Africa has only four refineries. This data reinforce the urgent need for refineries across the continent. Nigeria is the fifth largest exporter of oil in the world while it is also the largest economy in Africa but the entire country depends on just four refineries. Clearly, oil production far exceeds refinery output and while the domestic market exists, it is underserved. Focusing on Nigeria, the Nigerian National Petroleum Corporation (NNPC) spends $16 million to $20 million dollars per day on fuel imports. This amounts to about $1.9 billion dollars per quarter. Recently, while addressing state correspondents, the Group Executive Director Upstream of NNPC, Bello Rabiu, reacting to the inability of the nation’s refineries to meet the needs of consumers, said that it was unfortunate the organization had to rely on imports to satisfy local consumption. He also spoke of “the need to diversify, export more and import less”.

More refineries in African countries, especially for a country like Nigeria could mean a lot of things – economic growth as a major impact. If crude oil were refined locally, then countries could escape export charges, import charges and subsidy payments. This quantum of money could be re-directed to executing other important projects towards national development while refineries also increase job opportunities for both the skilled and unskilled. Moreover, the market of petroleum products and the supply chain will be well controlled and free from some international manipulations.

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