The downstream market is dynamic in Africa and continues to evolve and become more transparent throughout the supply chain, says African energy specialist CITAC Africa executive director Gary Still.
He told the annual African Refiners & Distributors Association (ARA) conference, in Cape Town, on Tuesday, that while energy would be increasingly retrieved from different sources such as gas and renewables, the oil share is forecast to remain unchanged in percentage terms.
CITAC Africa anticipates that additions to Africa’s refining capacity will not cover the shortfall in demand.
Still told delegates about several developments in refining capacity in Africa. This includes upgraded units in several refineries in Egypt and the expansion of three refineries in Algeria. He also highlighted Dangote Group's investment in Nigeria. Dangote is building the world’s largest greenfield refinery, which will churn out 600 000 bbl/d of oil.
Still pointed out that there were also investments in Cameroon to produce a new vacuum unit, while there was talk of a new refinery in Uganda and a possibility that the Libito refinery in Angola would be revived.
Despite upgrades, the appetite for investing in refineries is not as strong as hoped.
“We fear that private equity does not have enough confidence in bankrolling refinery projects. That’s not only in Africa . . . It’s global.”
Despite this, he described the situation in Africa as quite resilient.
“The momentum is there. There are survivors in niche areas with the right political environment.”
He said West Africa posed a complex downstream environment.
“There are a patchwork of different specs, with seven permissible levels of sulphur.”
He said aromatics, polycyclic aromatic hydrocarbons and olefins could be the next targets following benzene.
CITAC Africa has also seen a sharper focus on cleaner fuels.
Still said African countries are showing an increasing interest in liquefied petroleum gas (LPG), with demand likely to double within the next ten years in sub-Saharan Africa.
He said LPG demand was boosted by the removal of kerosene subsidies, while LPG could easily be used in an urban environment.
He outlined several challenge, including extra storage needed in future and keeping track of and retrieving gas cylinders.
While there were increased investments in pipelines and rail, Still said African countries were "catching up with market developments and growth rather than leading it".
He pointed out encouraging berth modifications and rehabilitation projects in Lagos and Dakar in particular.
African countries still face a very high overall level of regulation, as well as government involvement in the downstream sector procurement and supply chain.
Still said there was very little harmonisation among different regions, with 50 different price structures among the 54 countries and different product import arrangements.
On the retail front, Still said Puma Energy and Vivo – the company behind the Shell brand in Africa – were tapping into the "ever-changing urban environment and demand" in Africa, with 100 new service stations.