(MENAFN- Trend News Agency)
A shortage of oil refineries across sub-Saharan Africa coupled
with soaring crude prices because of the war in Ukraine has left
countries dangerously short of fuel supplies, disrupting airlines
and causing queues at filling stations, Trend reports citing
Reuters .
The surge in prices comes in tandem with a spike in the cost of
food after Russia sent troops into Ukraine, hitting tens of
millions of people already living in precarious conditions, as well
as government and aid agency budgets.
Refineries across sub-Saharan Africa combined can process 1.36
million barrels of oil a day (bpd), in theory, but with many out of
action, only 30% of that capacity was used last year, according to
independent consultancy CITAC.
Refineries in Cameroon, Ghana and Senegal are shut, as are four
in South Africa. Africa's biggest oil producer, Nigeria, pumps over
1.3 million barrels a day, but the two privately owned plants still
running there can only process 1% of that.
The African Export-Import Bank and the African Petroleum
Producers' Organization signed a deal in May to create a
multi-billion-dollar 'energy bank' to boost private investment in
the sector but analysts say there a few quick fixes on the
horizon.
Fuel shortages are also hitting Western nations, but the impact
in Africa is expected to be longer lasting as governments and
companies are generally less able to afford the sky-high cost of
imported fuel, or come up with the millions of dollars needed to
get refineries running again at full tilt.
'It is likely that the situation may get much worse in the short
term,' Anibor Kragha, head of the African Refiners & Distributors
Association (ARDA), told Reuters.
Big Western oil companies have been withdrawing from refinery
projects in Africa in recent years and local investors and
governments have largely failed to plug the gap, leading to a
chronic lack of investment in modernising facilities.
The upshot is that despite the continent's estimated 125 billion
barrels of oil reserves and 600 trillion cubic feet of natural gas,
African countries rely almost exclusively on imported petroleum
products to power their economies.
Even major crude oil exporters, Nigeria and Angola, depend on
imports for almost 80% of their domestic fuel needs, government
officials say.
Governments are now scrambling to get refineries up and running
in the face of growing discontent over price spikes.
Ghana's 45,000 bpd Tema refinery, for example, has been out of
action since an explosion in January 2017. Ghana's President Nana
Akufo-Addo said 'intense efforts' were now being made to
rehabilitate the refinery to help address soaring fuel prices.
However, getting the refinery online would require $40 million
in new investment, industry sources said, which the country can ill
afford as it contends with a growing mountain of debt and a
double-digit fiscal deficit.
It's a similar story in Cameroon.
The 42,000 bpd Limbe refinery has been shut since a fire in
2019, but a directive from the president's office seen by Reuters
asked the finance minister on April 22 to put plans in place
quickly to revamp the heavily indebted plant.
Africa's richest man, Aliko Dangote, a businessman who made his
fortune in cement, is building a vast refinery in Nigeria that will
have a capacity of 650,000 barrels a day, putting it just outside
the top five refineries in the world.
But its much-anticipated launch has been pushed back to next
year and the overhaul of Nigeria's Port Harcourt refinery which
will take years has only just started after two decades of
discussion.
Angola, which is Africa's second-biggest oil producer pumping
about 1.1 million bpd, has plans to build more refineries in
addition to its sole 65,000 bpd plant in Luanda.
Diesel and jet fuel in particular have been in short supply as
refiners drastically scaled back output during the pandemic when
travel restrictions grounded planes while Russian diesel volumes
have fallen since the Ukraine war began.
Nigeria's airlines threatened to suspend domestic flights due to
soaring jet fuel costs before backtracking. The country subsidises
gasoline at a high cost, but not diesel or jet fuel.
Scheduled maintenance is also curtailing supplies.
Senegal's 27,000 bpd SAR refinery in Dakar has been offline
since November for repairs and the country's gasoil supplies were
down to just three days at the end of April, triggering long waits
for motorists at pumps.
In South Africa, where four refineries are down including one of
the region's biggest, the 180,000 bpd Sapref plant in Durban, some
airlines were forced to re-route away from one of Africa's busiest
airports due to jet fuel shortages.
While some countries in North Africa are particularly exposed to
the slump in grain exports from Ukraine, refineries in the region
are in better shape than south of the Sahara, running at 80%
capacity last year, CITAC data showed.
In the absence of refining capacity, oil majors and commodities
trading firms have for years sent oil products from the Middle East
and Far East to float in large tankers off the shores of Togo in
West Africa, where they can then be split up into smaller volumes
for last-minute deliveries.
But with prices for immediate delivery so high and the market
unusually volatile, big players have pulled back. Higher trade
costs and extra outlays due to credit concerns with small,
independent African importers are compounding the problem.
Ghana has so far been spared shortages, but importers say daily
price increases mean each purchase is more expensive than the last.
Retail diesel prices were up more than 90% year-on-year in April,
according to Ghana's statistics service.
'These conditions mean you effectively need double whatever
credit you would have needed last year,' said Senyo Hosi, head of
the Ghana Chamber of Bulk Oil Distributors.
With prices for immediate delivery so high compared with future
months - a market phenomenon known as backwardation - there is
little incentive to store products for future sale.
'High outright prices and steep backwardation reduce the
incentives to hold discretionary or unsold inventory, leaving spot
or short-notice buyers vulnerable to shortages,' said Jamie
Torrance, head of distillates and biofuels at commodities trading
firm Trafigura.
Physical jet fuel prices hit record highs in April in Europe and
the United States while stock levels fell to their lowest in two
years at Europe's key ARA oil hub in the week to May 12.
Russian diesel, fuel oil and other products were previously
stored and re-blended in ARA (Amsterdam-Rotterdam-Antwerp) for
transport to Africa, but Russian crude and products can now only be
sold to European buyers in certain cases.
'This is unfortunately likely to further exacerbate the current
shortages,' Trafigura's Torrance said.
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