Inadequate refining capacity,
insufficient storage, and impeded product movement across Africa are the three
major impediments slowing the growth of the continent's downstream oil sector,
Wale Ajibade, Executive Director, Sahara Group has said.
Ajibade in a paper "Africa
Downstream Market Developments and Forecast" presented at the recently
concluded Africa Refiners and Distributors Association (ARDA) Week 2024 in Cape
Town, South Africa, said addressing these gaps would transform Africa's
downstream petroleum industry.
ARDA Week 2024 is the continent's
foremost gathering of stakeholders in the downstream oil industry.
Ajibade noted that shoring up the
continent's refining capacity was critical to sustaining efficiency,
availability and accessibility in the sector. He explained that as Africa
explores ways of achieving hitch-free energy transition, efforts must be made
to ensure optimisation of the sector's value responsibly and collaboratively.
"Many African countries lack
sufficient refining capacity to meet domestic demand, leading to heavy reliance
on imports. This lack of self-sufficiency leaves these markets vulnerable to
supply disruptions. Addressing this would require fresh investments and
collaboration across the sector's value chain," he said.
On insufficient storage
infrastructure, Ajibade said this has continued to hamper the ability to
maintain strategic reserves and ensure reliable supply during times of high
demand or supply chain disruptions.
"In East Africa, shippers at
Beira, Dar es Salaam and Mombasa — the key entry ports for refined products —
are experiencing significant demurrage. Ageing and poorly maintained pipeline
networks result in significant product losses and distribution
bottlenecks," he stated.
According to him, a collaborative
solution which involves regulators, operators, investors, financial
institutions, and government owned oil companies is required to help the
African downstream sector to reach its full potential and provide reliable and
affordable energy access to the continent's growing population.
"Africa's downstream Market
leaders will need to work closely with her the various governments and agencies
to carefully navigate the complex challenges through regulation and technology
adoption while pushing for sustainable growth across Africa," he said.
He further stated that the
continent increasingly relies on imports of refined products to support
consumption growth, primarily due to the underutilisation of existing refineries
caused by technical issues.
"Investments in refinery
upgrades, pipeline modernisation, and the construction of new storage
facilities will be crucial to overcoming these challenges and unlocking the
region's energy security and economic development," he added.
Highlighting some positive trends
in the sector, Ajibade said the African downstream market is experiencing rapid
growth and transformation, driven by soaring energy demand, population growth,
and the focus on industrialisation, urbanisation, and economic He explained
that these would drive the demand for refined petroleum products,
petrochemicals, and related downstream services is forecasted to grow by up to
30per cent by 2040.
"Africa is experiencing a
lot of migration from rural to urban areas. In 2015, Africa had only six cities
with more than five residents compared to 17 expected in 2030. Africa has
experienced an increase in the number and capacity of industries across the
continent, with industrial GDP set to double by 2025," he said.
On the promotion of regional and
cross-border trade, Ajibade noted that initiatives such as the African
Continental Free Trade Area are promoting regional integration and facilitating
cross-border trade in downstream products.
"This is encouraging
investments in integrated downstream assets, logistical infrastructure, and
harmonised regulatory frameworks to capitalise on the expanded market
opportunities," concluding that production of chemicals, plastics,
lubricants, and specialty products would foster self-sufficiency and spur
economic growth through increased job creation, reduced import reliance and
enhanced technological innovation."
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