African refining operators have indicated their readiness to establish a roadmap to ensure only clean fuels that meet effectively satisfy climate change specifications are produced at the continent’s refineries and consumed across its major cities.
This is even as the Economic Community of West African States (ECOWAS) has ratified that by 2025, all petroleum products produced in West Africa must meet 50PPM specification, while investments have to be made to upgrade existing refineries to produce clean fuels.
Executive Secretary of the African Refiners and Distributors’ Association (ARA), Anibor Kragha made this known at the on-going 14th Oil Trading and Logistics (OTL) Africa Downstream Week virtual conference and exhibition, where he disclosed that it had become imperative for African refiners to fashion an orderly and sustainable transition to cleaner fuels in order to address public health and environmental issues.
Kragha, delivering a paper to address “Petroleum Refining Trends in Africa and Outlook for Tomorrow’s Energy Supply”, said “ARA is collaborating with the African Union (AU) to adopt a harmonized Pan-African AFRI-6 fuel specification of 10PPM across the continent. In this regard, as soon as refining capacity increases on the continent, Africa must develop a transparent benchmark for petroleum products.”
However, the former Chief Operating Officer, NNPC Refineries, noted that the first thing African operators needed to do was to secure transition funding to help facilities meet existing compliance regulations.
“Something that will support the African clean fuels roadmap is what I call the African Benchmark for petroleum products. For now the benchmark for petroleum products traded in Africa are done in Rotterdam as more or less the basis of pricing. But once refineries like Dangote come on stream along with others on the continent, we need to have our own benchmark for Africa,” Kragha said.
He added that “This will be a transparent benchmark that operators can relate to maximize the value of petroleum products produced from the refineries.”
Kragha stressed that refining dynamics were evolving and noted that for Africa, the refinery of the future is going to be a blend of products and petrochemicals. “We must also focus on African energy security and develop our storage and distribution infrastructure to deliver the petroleum products safely and efficiently across the continent.
Chairman, PEJAD Nigeria, Engr. Anthony Ogbuigwe, in his address stated categorically that clean fuels will drive refinery growth in Africa in the medium to long term and cautioned that refineries in Afria must adapt to thrive, or die.
He noted that only large plants with economies of scale could surmount the challenges, while they must prioritize compliance to attract much-needed funding.
He also advised that in order to remain viable, most African refineries must evolve through different ownership structures that will encourage partial privatization, ensure reliability and attract senior technical and commercial professionals to achieved objectives.
The former President of ARA further observed that African refineries must be designed for top of the barrel products in view of the fact that competition with renewable energy for funding is becoming an issue for refiners.
“Refineries must also capitalize on the abundance of sweet crude oil grades on the continent to establish comparative advantage in the production of International Maritime Organisation’s (IMO) compliant marine bunker.
With crude oil as the major cost in the economics of refining, Ogbuigwe called on government to provide incentives that would help refinery operators take advantage of the provisions of the African Continental Free Trade Agreement (AfCFTA) to scale their operations on the continent.
Reiterating Engr Ogbuigwe’s position about large scale refineries, Director, Business Strategy, Dangote Oil Refinery, Mr Srinivas Rachaconda said “Africa needs another refinery as big as Dangote’s to give legitimacy to the quest for an African petroleum products benchmark.”
Rachaconda noted that the Dangote Refinery was prepared to produce Euro V complaint fuels of 10PPM specification. He confirmed that PMS, jet fuel and diesel would constitute 95 per cent of the refinery’s products which indicate a 98 per cent value addition rate from the plant. Therefore, he stressed the need for operators to transform radically in view of changing energy demand patterns.
Meanwhile, modular refinery developer, Capt. Emmanuel Ihenacho, in his intervention observed with concern that “The investment required to achieve compliance with new refining standards is enormous & is slowing down developments in modular refining.”
“Refineries must start making plans to remain compliant in the future & government needs to invest in the promotional aspect of crude refining by guaranteeing feedstock availability, discounts & incentives”, he proposed.
Reacting to a question on idle refinery licenses, the Chairman, Integrated Oil and Gas Limited, said most prospective modular refinery operators appeared to underestimate the amount of work required and called for caution before venturing into the project.
On his part, Managing Director of the Kaduna Refining and Petrochemicals Company Limited, Mr Ezekiel Osalorube highlighted Africa’s 3.7 per cent contribution to global refining capacity and noted that this was set to increase to 15 per cent when expected additional capacity comes on stream.
He also mentioned that Africa’s 8.2 mbpd crude oil production capacity far outweighs its refining capacity, stressing the need for refineries on the continent to become more clean fuel complaint to take up the excess crude.
Osalorube informed the virtual audience that NNPC had commenced the process of full rehabilitation of its refineries in view of the new model of operations it hopes to introduce.
“The first phase would be to raise capacity, while the second phase would involve upgrading the facilities to meet clean fuels compliance levels”, he said, adding that auditing had been completed for the Port Harcourt refinery and it was due to be awarded in December.
Mr Victor Onyegbado, Partner, Akabogu & Associates moderated this session that congregated Africa’s refining heavyweights comprising Mr Srinivas Rachakonda, Director, Business Strategy, Dangote Refinery; Engr. Ezekiel Osarolube, Managing Director, Kaduna Refining and Petrochemicals Company (KRPC); Mr Anibor Kragha, Executive Secretary, African Refiners Association (ARA); Engr. Anthony Ogbuigwe, Chairman, PEJAD Nigeria and Captain Emmanuel Ihenacho, Executive Chairman, Integrated Oil and Gas Limited.