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.
The Executive Director of Sahara Group stated this in a paper: “Africa Downstream Market Developments and Forecast.”
The paper was presented at the recently concluded Africa Refiners and Distributors Association Week 2024 in Cape Town, South Africa.
In it, Ajibade 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.
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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.
He said: “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.”
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.
He added: “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.”
According to Ajibade, 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.
He said: “Africa’s downstream Market leaders will need to work closely with the various governments and agencies to carefully navigate the complex challenges through regulation and technology adoption while pushing for sustainable growth across Africa.”
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 economy.
He explained that these would drive the demand for refined petroleum products, petrochemicals and related downstream services is forecasted to grow by up to 30 percent by 2040.
He said: 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.”
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.
He said: “This is encouraging investments in integrated downstream assets, logistical infrastructure, and harmonised regulatory frameworks to capitalise on the expanded market opportunities.”
He said the 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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