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  • Shortage of oil refineries haunts Africa as fuel prices rocket
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Shortage of oil refineries haunts Africa as fuel prices rocket

Thelma D. Griggs 01/06/2022 6:57 AM

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A shortage of oil refineries throughout sub-Saharan Africa coupled with soaring crude charges mainly because of the war in Ukraine has still left international locations dangerously short of gasoline provides, disrupting airlines and triggering queues at filling stations.

The surge in selling prices comes in tandem with a spike in the price tag of food stuff soon after Russia despatched troops into Ukraine, hitting tens of tens of millions of folks already living in precarious problems, as nicely as authorities and support agency budgets.

Examine: Shocker fuel price tag hike regardless of extension of gas levy relief

Refineries throughout sub-Saharan Africa mixed can method 1.36 million barrels of oil a working day (bpd), in idea, but with lots of out of motion, only 30% of that capability was applied previous 12 months, in accordance to independent consultancy CITAC.

Refineries in Cameroon, Ghana and Senegal are shut, as are four in South Africa. Africa’s greatest oil producer, Nigeria, pumps in excess of 1.3 million barrels a working day, but the two privately owned plants still working there can only procedure 1% of that.

Read through: South Africans staring down the barrel of history-substantial petrol selling prices

The African Export-Import Financial institution and the African Petroleum Producers’ Organisation signed a deal in Might to generate a multi-billion-greenback “energy bank” to improve personal investment in the sector but analysts say there a handful of swift fixes on the horizon.

Fuel shortages are also hitting Western nations, but the impression in Africa is anticipated to be for a longer time long lasting as governments and providers are normally fewer ready to manage the sky-higher charge of imported gas, or arrive up with the hundreds of thousands of bucks desired to get refineries jogging all over again at comprehensive tilt.

“It is possible that the predicament may well get a great deal worse in the limited expression,” Anibor Kragha, head of the African Refiners & Distributors Affiliation (ARDA), told Reuters.

Browse: Petrol price tag horror

Huge Western oil firms have been withdrawing from refinery initiatives in Africa in latest several years and local traders and governments have largely failed to plug the gap, primary to a serious absence of financial commitment in modernising facilities.

The upshot is that inspite of the continent’s estimated 125 billion barrels of oil reserves and 600 trillion cubic toes of organic gasoline, African countries count almost completely on imported petroleum products to energy their economies.

Even important crude oil exporters, Nigeria and Angola, count on imports for almost 80% of their domestic gasoline desires, government officers say.

Dangote refinery

Governments are now scrambling to get refineries up and running in the confront of rising discontent in excess of price tag spikes.

Ghana’s 45,000 bpd Tema refinery, for example, has been out of motion considering that an explosion in January 2017. Ghana’s President Nana Akufo-Addo claimed “intense efforts” were now staying created to rehabilitate the refinery to support tackle soaring fuel prices.

Even so, obtaining the refinery on the internet would demand $40 million in new financial commitment, field sources reported, which the region can unwell afford to pay for as it contends with a expanding mountain of personal debt and a double-digit fiscal deficit.

It is a comparable tale in Cameroon.

The 42,000 bpd Limbe refinery has been shut given that a fireplace in 2019, but a directive from the president’s business witnessed by Reuters asked the finance minister on April 22 to place plans in put speedily to revamp the intensely indebted plant.

Africa’s richest person, Aliko Dangote, a businessman who manufactured his fortune in cement, is making a broad refinery in Nigeria that will have a capacity of 650,000 barrels a day, placing it just outside the leading five refineries in the globe.

But its a lot-anticipated start has been pushed back again to following 12 months and the overhaul of Nigeria’s Port Harcourt refinery which will consider several years has only just started out right after two a long time of dialogue.

Angola, which is Africa’s next-most important oil producer pumping about 1.1 million bpd, has designs to establish additional refineries in addition to its sole 65,000 bpd plant in Luanda.

Diesel and jet gasoline in distinct have been in short supply as refiners greatly scaled back output throughout the pandemic when journey limits grounded planes even though Russian diesel volumes have fallen since the Ukraine war began.

Nigeria’s airways threatened to suspend domestic flights thanks to soaring jet gas charges right before backtracking. The region subsidises gasoline at a superior expense, but not diesel or jet gasoline.

Scheduled maintenance is also curtailing materials.

Senegal’s 27,000 bpd SAR refinery in Dakar has been offline given that November for repairs and the country’s gasoil supplies ended up down to just a few times at the end of April, triggering lengthy waits for motorists at pumps.

In South Africa, where by four refineries are down like 1 of the region’s largest, the 180,000 bpd Sapref plant in Durban, some airlines had been compelled to re-route away from just one of Africa’s busiest airports because of to jet gasoline shortages.

While some international locations in North Africa are specifically uncovered to the slump in grain exports from Ukraine, refineries in the location are in improved form than south of the Sahara, functioning at 80% capability last calendar year, CITAC information showed.

Sanctions noose

In the absence of refining potential, oil majors and commodities investing companies have for a long time sent oil products and solutions from the Middle East and Much East to float in huge tankers off the shores of Togo in West Africa, the place they can then be split up into scaled-down volumes for previous-moment deliveries.

But with costs for quick shipping and delivery so higher and the industry unusually volatile, significant players have pulled again. Higher trade expenditures and excess outlays because of to credit history problems with tiny, unbiased African importers are compounding the problem.

In latest tenders to get diesel or jet fuel, traders stated only two or three organizations responded, when compared with 6 or much more prior to the Russian invasion of Ukraine, which Moscow calls a “special navy operation”.

Ghana has so much been spared shortages, but importers say every day price will increase mean every purchase is extra costly than the past. Retail diesel costs ended up up a lot more than 90% yr-on-year in April, in accordance to Ghana’s figures assistance.

“These situations mean you effectively have to have double whichever credit rating you would have essential previous calendar year,” stated Senyo Hosi, head of the Ghana Chamber of Bulk Oil Distributors.

With prices for rapid delivery so significant in contrast with long run months – a market phenomenon recognized as backwardation – there is minimal incentive to retail outlet products and solutions for potential sale.

“High outright costs and steep backwardation reduce the incentives to keep discretionary or unsold stock, leaving location or limited-detect consumers vulnerable to shortages,” mentioned Jamie Torrance, head of distillates and biofuels at commodities trading firm Trafigura.

Actual physical jet gasoline selling prices hit record highs in April in Europe and the United States whilst inventory concentrations fell to their most affordable in two yrs at Europe’s important ARA oil hub in the week to Might 12. ARA/

Russian diesel, fuel oil and other solutions were being previously saved and re-blended in ARA (Amsterdam-Rotterdam-Antwerp) for transport to Africa, but Russian crude and goods can now only be sold to European purchasers in certain cases.

“This is sad to say most likely to more exacerbate the present-day shortages,” Trafigura’s Torrance claimed.

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