Page 5 - DMEA Week 20 2022

DMEA COMMENTARY DMEA

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

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