Africa|Construction|Financial|Gas|Hydrocarbons|Industrial|Infrastructure|Oil And Gas|Oil-and-gas|PROJECT|Projects|Refinery|Refining|Road|Roads|Environmental|Infrastructure
Africa|Construction|Financial|Gas|Hydrocarbons|Industrial|Infrastructure|Oil And Gas|Oil-and-gas|PROJECT|Projects|Refinery|Refining|Road|Roads|Environmental|Infrastructure

Financing African hydrocarbon projects needs a segmented approach

24th April 2024

By: Rebecca Campbell

Creamer Media Senior Deputy Editor


Font size: - +

In an era in which raising finance for major hydrocarbons projects is increasingly challenging, the developers of such projects in Africa should consider segmenting them and separately seeking finance for each segment. That advice was given by Africa Finance Corporation Senior Associate Shao Olumide. He was participating in a panel discussion at the 2024 African Refiners and Distributors Association conference, in Cape Town.

Globally, investors were moving away from hydrocarbons projects, including fossil fuel refineries, he pointed out. But investors not willing to invest in a refinery itself might very well be prepared to invest in infrastructure ancillary to, but essential for, the operation of the refinery, such as roads, piers and other port or terminal infrastructure.

Participating in the same panel, Standard Bank global head: infrastructure Dele Kuti reinforced the point. Investing in oil and gas projects created challenges for especially private sector financers. These were ESG (environmental, social, governance) challenges, but particularly environmental. His group faced regular weekly protests from environmentalists because it continued to finance African fossil fuel projects, he noted. To attract funding, such projects really needed strong equity partners.

The Uganda National Oil Company (UNOC) had already successfully adopted the segmented financing approach, for its national refinery project, reported UNOC GM refining Michael Mugerwa, who was also on the panel. The Uganda Refinery project was part of the country’s Kabaale Industrial Park (KIP) project. Among other complexes and facilities, the KIP would house the country’s second international airport (which was now near completion).    

He explained that the different elements of the overarching KIP project had received funding from different sources. Thus, the UK had provided funding for the airport, while an unnamed European Union country had financed the construction of the KIP road network. But neither had provided funding for the refinery itself, which was being financed from other sources.

Olumide also advised hydrocarbon project developers to make use of financial advisers when seeking funding for their projects. These advisers knew how the financial sector worked, and who might be interested in funding the specific project proposed. This would save a lot of time for developers, when they started looking for finance.

Addressing the slowness of financial institutions to green-light hydrocarbon projects, Kuti cited the challenges created by ESG issues as the cause. These could be overcome, but it took time. On top of this, most African sovereigns were rated sub-investment grade, meaning that getting government guarantees for a project was also challenging. And, further, in many African countries, financing such major projects posed foreign exchange challenges, as the project was valued in hard currency but the local currency was soft.      

Edited by Creamer Media Reporter




Showroom image
Alcohol Breathalysers

Supplier & Distributor of the Widest Range of Accurate & Easy-to-Use Alcohol Breathalysers

Universal Storage Systems (SA)
Universal Storage Systems (SA)

South African leader in Steel -Racking, -Shelving, and -Mezzanine flooring. Universal has innovated an approach which encompasses conceptualising,...


Latest Multimedia

sponsored by

Magazine round up | 21 June 2024
Magazine round up | 21 June 2024
21st June 2024
Corobrik sets out plans for its Rietvlei operations
Corobrik sets out plans for its Rietvlei operations
19th June 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?







sq:0.594 0.665s - 163pq - 2rq
Subscribe Now