ARDA moves to harmonise fuel specifications for African refiners
Anibor Kragha, executive secretary, African Refiners and Distributors Association (ARDA)
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Refineries upgrade is key, with $15.7bn as of 2021
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Nigeria, West Central Africa require $6.28bn to upgrade 12 refineries
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North Africa with 17 refineries, needs $5.95bn vs ESA’s $3.42 for 7 refineries
Ben Eguzozie
Africa’s petroleum industry is witnessing downstream expansion. This stems from the rising demand for African energy. Anibor Kragha, executive secretary of African Refiners and Distributors Association (ARDA), also known as Société africaine de raffinage – (SAR in French), says the group will be taking steps to harmonise fuel standards across the continent, and support oil and gas projects throughout the continent.
Kragha explained ARDA’s “tale of three decades” strategy guiding their plans to deliver a unique, sustainable energy transition roadmap for the African downstream sector. “Our strategy focuses on three pillars: cleaner transport and cooking fuels (including low-sulphur fuels and LPG) and S&D infrastructure and petrochemical projects; support for biofuels, Sustainable Aviation Fuel (SAF) and mature, cost-effective renewable energy solutions; and finally, cleaner primary energy sources for power e.g., replacing coal and oil with natural gas.
“ARDA’s vision of the ‘tale of three decades’ is as follows: Decade One (now to 2030), focus should be on upgrading refineries to produce cleaner fuels and reduce carbon footprint, LPG for clean cooking and regional S&D infrastructure while adopting cost-effective renewables like solar technology. Decade Two (2030 to 2040) will integrate biofuels, wind and other emerging renewables technologies. Decade Three (2040 to 2050), will incorporate more advanced solutions like CCUS, hydrogen, etc, as they become more mature,” he added.
He said ARDA has led efforts to harmonise fuel specifications across Africa, notably through supporting the 2020 Economic Community of West African States (ECOWAS) directive adopting AFRI-5 specs of 50 parts per million (ppm) sulphur for fuel. Africa currently has 11 diesel grades (10 to 10,000 ppm sulphur) and 12 gasoline grades (10 to 2,500 ppm). ARDA has partnered with the UN Environment Programme (UNEP), and participated in the 2022 UNEP Africa Meetings with energy ministers in Nairobi to promote cleaner fuel and vehicle emissions standards across the continent. ARDA has also collaborated with the African Union Commission (AUC) to deliver reports highlighting the health and socio-economic benefits of adopting cleaner, low-sulphur fuels, as well as the costs of upgrading African refineries to produce AFRI-6 (10-ppm sulphur) fuels. ARDA, as part of the OPEC-Africa Energy Dialogue, continues to work with OPEC, the AUC and the African Petroleum Producers Organisation (APPO) on the development of a robust, intra-African oil and gas industry that is focused on eliminating energy poverty while balancing both energy security and energy transition
Energy experts agree that strengthening refining capacity and distribution in Africa is critical, considering that African petroleum demand is set to increase from the current 4.1 million barrels per day (bpd) estimates to over 5.3 million bpd by 2040.
There are a total of 42 refineries in Africa, with a total nameplate refining capacity of 3,217,600 barrels per day (bpd). West & Central Africa including Nigeria has 12 refineries, while North Africa has 17 refineries. The value of Africa’s oil and gas stood at $171 billion as of 2018, making the continent a significant player in energy. As of 2020, the continent had over 1.2 million barrels per day refining capacity, with Egypt leading with 833,000 bpd. Algeria and Libya followed with 677,000 bpd and 634,000 bpd, respectively. Nigeria, top oil producer, sorely has zero refining, as all its four refineries with combined 445,000 bpd nameplate capacity lay comatose.
In 2021, Kragha had said that cleaner, harmonised, pan-African fuels specifications were required; and there has been uneven progress in tightening fuel specifications across the continent.
To meet the African energy rising demand sustainably with minimal carbon footprint, he said ARDA needs a strategic approach. “First, regulators in MSGBC must create favourable frameworks for investment; projects need thorough preparation to ensure they are bankable, with clear scopes, costs and schedules; projects must prioritise low carbon footprints and incorporate ESG considerations. We need skilled professionals to execute these projects. With these foundations in place, financing becomes more accessible. The MSGBC platform can play a crucial role in establishing these pillars to attract investment and achieve a sustainable energy future for the region,” Kragha said.
On developing refineries, the ARDA boss said they were working with the African Union (AU) and the African Petroleum Producers Organisation (APPO) to promote a robust intra-African oil and gas industry. The goal is to balance energy security and the energy transition while maximising oil production and value addition on the continent to reduce imports and enhance long-term energy security.
A report in 2021 said most ARDA member-refineries would require some $15.7 billion to upgrade the continent’s 42 oil refineries in the years ahead. Nigeria with West and Central Africa, with 12 refineries would need $6.28 billion capital expenditure for their upgrade. North Africa will require $5.95bn to upgrade its 17 refineries. East and Southern Africa with seven refineries would need $3.42 billion to implement a similar refining capacity upgrade.
The report said the funds were particularly needed for the engineering, procurement and construction (EPC) processes for the improvement of the facilities.
Some oil industry watchers maintain that the higher amount of funds required by West and Central Africa countries, though with fewer refineries (12) compared to North Africa with 17 refining plants, is indicative of the region’s poor maintenance culture of its refining plants.
Nigeria, a key oil producer in the West Central African region, with nameplate capacity of 445,000 bpd, today produces zero fuel from its four refineries. This is clearly dwarfed by Egypt’s 814,000 bpd, the continent’s biggest refining capacity; Algeria’s 657,000 bpd, and South Africa’s 520,000 bpd. Nigeria only leads war-ravaged Libya with 380,000 bpd refining; Angola, with 80,000 bpd, Gabon, with 24,000 bpd, and Congo, with 21,000 bpd.
On implementing investment projects and promoting best practices in the downstream sector, ARDA will utilise key initiatives such as ARDA Week and seven specialised workgroups, focusing on refining upgrades, associated storage & distribution (S&D) infrastructure development, ESG, adoption of LPG for ‘clean cooking,’ effective regulatory frameworks, strategic human resource management and cost-effective sustainable project financing. The group collaborates with regulators to create supportive investment frameworks and host investment forums to connect African project developers with financiers.
“Our partnership with McKinsey & Company aims to create a register of bankable, sustainable African energy infrastructure projects. Our Association is focused on launching two funds: a $1 billion fund dedicated to investing in large-scale LPG projects and another for upgrading refineries to produce clear fuels via reduced carbon footprints and supporting petrochemical projects. Our goal is to match projects like SAR 2.0 with financiers to secure essential funding to deliver the project within the envisioned timeline,” Kragha said.
He said the Dangote Refinery, which is the world’s largest single-train refinery, at full capacity, will produce AFRI 6 (10-ppm sulphur) fuels, significantly boosting Africa’s energy security.
“With energy demand in Africa projected to grow 45-55 percent by 2040, Dangote Refinery will be a game-changer, reducing the need for imported crude and enhancing energy independence. ARDA aims to support investments that refine more African crude locally, balancing energy security with a lower carbon footprint. ARDA is excited about the Dangote Refinery and other key projects, such as upgrades at SIR (Société ivoirienne de raffinage) in Ivory Coast and new refineries in Ghana and Uganda,” he said.