NewsNorth AfricaGovernment and investors at a strategic impasse

Fri,18Apr2014

Posted on Thursday, 14 March 2013 13:45

Government and investors at a strategic impasse

Sweet turns to sour for Niger’s refinery/Photo©BOUREIMA HAMA/AFPIn a weak investment climate for refineries, South Africa and Nigeria are still looking for ways to increase capacity.

 

Scores of refinery projects sit on ministers' desks across Africa, as investors baulk at cost, weak refining margins and regulatory uncertainty.

State-owned Chinese companies have shown the keenest interest, starting talks for large new plants in Nigeria and South Africa – but the Chad and Niger operations they built in 2012 have have failed to perform as expected and the governments have sought to renegotiate the terms of their deals.

David Bleasdale, the executive director of consultancy CITAC Africa, says: "Refinery investment will most likely occur where there is a large inland market, an efficient supply-chain infrastructure, a stable government with an enabling economic policy and access to a local regional market for products exports."

He says excess international capacity and cheap freight will continue to put pressure on African refineries.

However, governments tend to see refineries as a strategic investment.

Current projects face difficulties in meeting the criteria for success cited above.

South Africa's state-owned PetroSA is eager to build the Mthombo refinery at the Coega Industrial Development Zone (IDZ) near Port Elizabeth, which, with a proposed capacity of 400,000 barrels per day, would be Africa's largest plant.

With new fuel standards to take effect in 2017, current refiners say they will struggle to upgrade their facilities without government support.

Local experts say the Coega is a less than ideal location because it has no links to the $2bn multi-products pipeline linking Durban and Johannesburg.

PetroSA and China's Sinopec are studying the cases for Mthombo, which could cost about $9bn.

While the governments of Angola, Gabon, Côte d'Ivoire and Uganda debate the viability and time frames of their refinery plans, the Nigerian government wants to conduct long-overdue maintenance on its refineries, which a government study found to be the worst-performing plants in Africa.

In December, the Nigerian National Petroleum Corporation announced plans to spend N152bn ($967m) for rehabilitation works on three refineries●



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