Page 7 - NorthAmOil Week 20 2022

NorthAmOil COMMENTARY NorthAmOil

Africa oil refineries, all of which have been idle for
Meanwhile, African countries, many of which some time. However, the privately owned Dan-
rely on imports to cover to their full demand for gote Refinery, which will have a capacity of
refined products even in cases of upstream abun- 650,000 bpd, is due to begin operations later this
dance, are also being affected. year, giving Abuja hope for the future.
The disconnect between hydrocarbon pro- Inexplicably, though, rather than leveraging
duction and downstream capabilities is particu- the little modular refining capacity the country
larly pronounced south of the Sahara Desert. does have, Nigerian National Petroleum Co. Ltd
The two largest economies in sub-Saharan (NNPC Ltd) has been exporting its full crude
Africa, Nigeria and South Africa, are wrestling slate. This has forced private refiners to make a
with issues around supply and prices of jet fuel, choice between sourcing crude from elsewhere
diesel and gasoline, with the refining slates of or shutting up shop.
both countries largely out of commission. Meanwhile, Abuja has lately been forced to
For South Africa, the shortage is most acute introduce three months of subsidies for jet fuel
for jet fuel. There doesn’t seem to be an easy amid threats by airlines to ground domestic
solution, and with two of the country’s six flights, and such measures are likely to continue
refineries (Engen and Sapref) having already at least until the refining work is complete. This
shut down, likely permanently, the outlook is is by no means a sustainable solution, and esti-
bleak. In the meantime, a decision on the fate mates peg Nigeria’s subsidy bill at $1-3mn for
of another plant (Natref) is due to be taken this the three-month period – on top of gasoline
year, while a fourth refinery (Astron) is recov- subsidies, which are expected to total $12bn in
ering from a fire and another (Mossel Bay GTL) 2022, up from $3.85bn in 2021.
is struggling to obtain adequate feedstock. These problems are not confined to Africa’s
Only Sasol’s 160,000 bpd Secunda coal-to-liq- larger economies, though. Senegalese flights
uids (CTL) plant is fully functional and is even to Paris have routinely been forced to make
undertaking an improvement programme. fuel stops in the Canary Islands of late, and the
Without these refineries, South Africa has no country’s largest airport has been requesting The minister said
choice but to continue depending on imports to that incoming flights take measures to ensure
cover the vast majority of its fuel demand. This they carry enough fuel for the return flight. on May 9 that
is a logistically challenging practice, as most of underinvestment
these imports enter the country by sea, via the Middle East
port of Durban. From Durban, jet fuel must be While Dakar has blamed “unfavourable inter- in global refining
piped to Natref for inspection before it can be national conditions,” the oil industry’s de facto
used by airlines, a process that takes weeks. kingpin, Saudi Arabia’s Energy Minister Prince capacity was to
It is also expensive. Industry observers esti- Abdulaziz bin Salman Al Saud, has come to the
mate that the refinery closures could see South defence of producers. blame for fuel
Africa’s petroleum product import bill soar by As he has done repeatedly with reference to supply shortages
as much as 300%, presenting a clear challenge to upstream investment, the minister said on May
the extension of the fuel tax break. In the mean- 9 that underinvestment in global refining capac- and high prices.
time, there is further price pain for consumers ity was to blame for fuel supply shortages and
ahead, as the ZAR1.5 ($0.09) per litre tax holi- high prices. “All mobility fuels have skyrocketed
day is due to expire this month. Drivers are now ... and the gap between crude prices and these
set to see gasoline and diesel prices rise by 16% products in some cases is actually 60%,” he said.
and 14% respectively within inland areas and “The facilities that can convert oil into useable
17% and 15% respectively along the coast. products have shrunk and ... are shrinking. So,
Elsewhere in Africa, Nigeria’s national oil is it an issue of crude availability? The answer is
company (NOC) is still implementing a major ‘no,’” he told attendees at an industry event in
overhaul programme covering four state-owned Bahrain.

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