Divided under the sun: Sub-Saharan refining

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The expression ‘Sub-Saharan Africa’ is used as an umbrella term for the African countries south of the Sahara Desert. Northern Africa is considered a part of the Arab World. The Sahara Desert, with its famously inhospitable climate, forms a natural geographic barrier between North Africa and the rest of the African continent. Stretching along the southern edge of the Sahara Desert is the Sahel, a semi arid region where drought and human activity (such as overgrazing and use of vegetation for firewood) have caused extensive desertification.

Most of the people in this area live in extreme poverty. Yet Africa in general has enjoyed a noticeable rise in prosperity over the past decade. Prices for African commodities including oil, minerals and metals have been especially strong, motivating governments across the continent to seek higher rents and larger ownership stakes in resource development and extraction projects. Both public and private sectors have shown growth, and there is a growing middle class population now driving additional growth and advancement. The African Development Bank reports that one third of Africans are now considered middle class, while only a quarter were classified as middle class a decade prior.

There also have been major advances made in public health. Africa has achieved a huge slowdown in the spread of the AIDS virus and in AIDS related deaths. This represents a major victory given that Africa is home to roughly three quarters of the world’s population living with HIV/AIDS. Africa also has seen a remarkable drop in infant mortality rates. The World Bank recently reported that 16 of 20 countries studied in Sub-Saharan Africa have reported a drop in infant mortality rates since 2005.

Sub-Saharan energy market

African prosperity is rising and energy demand is expected to continue to rise with it. However, developing some energy resources and delivering them to end users is often a challenge. Because the Sahara Desert and the Sahel take up a vast swathe of the continent, population centres have tended to cluster along the coastal areas, and these areas also have the greatest concentration of oil and natural gas development. Yet many population centres are scattered and small, separated by many miles of difficult terrain, particularly the landlocked countries. This has discouraged the construction of energy infrastructure, such as petroleum product and natural gas pipelines. Nigeria and Equatorial Guinea have been able to develop natural gas resources for export in the form of LNG, which is shipped mainly to markets in Europe, the USA and Asia, but in many other cases there are few options to monetise remote natural gas resources.

Fossil energy resources are abundant, though they are not equally distributed in all countries. Approximately 92% of African coal resources, for example, are in South Africa alone. Natural gas and petroleum resources are concentrated in North Africa. In Sub-Saharan Africa, Nigeria possesses extensive oil and natural gas resources, along with other West African countries, yet many other countries possess essentially no commercial oil and gas production.

In the early 1980s, Nigeria accounted for 80 – 85% of the region’s reserves, but successful exploration in many neighbouring countries has greatly expanded and diversified the reserves base. In 2010, BP’s Statistical Review placed proved reserves at 61.8 billion bbls, more than a three fold increase since 1980. Nigeria’s share of reserves fell to 60%, as reserves have grown in countries such as Angola, Equatorial Guinea, Gabon and the Republic of Congo. Most of these West African crudes are high quality and sweet.

In the early years, Nigeria produced 80 – 90% of Sub-Saharan Africa’s crude output. While Nigeria remains the largest producer in the region, a number of other key producers have emerged, including Angola. In 1965, Angolan crude output was a mere 13 000 bpd, but it has grown to 1.85 million bpd, equating to an average increase of 11.6%/y for 45 years. Angolan officials recently stated that crude production is forecast to rise to 2 million bpd by 2014. Output from the Republic of Congo also has grown enormously, from approximately 1400 bpd in 1965 to 292 000 bpd in 2010. In 2010, Nigerian output of approximately 2.4 million bpd accounted for less than half (45%) of the 5.33 million bpd regional output.

The main fossil energy producers also tend to be the main total primary energy producers. The top three countries (South Africa, Nigeria and Angola) account for 81% of the total primary energy production, while the top 10 countries account for 96%.

Primary energy use has quite a striking picture of distribution. South Africa alone accounts for 61% of total primary energy use. Adding the Nigerian and Angolan markets raises the total to 72%. The top 10 markets account for 85% of primary energy use.

Africa is a growth market for petroleum fuels, and export oriented refiners in the Middle East, Asia, Europe and even the Americas view Africa as an important market outlet. Yet  Sub-Saharan Africa is home to numerous refineries already, some of them struggling to improve operations, and essentially all of them keen to survive and perhaps even expand.

Regional capacity developments

Apart from South Africa, Sub-Saharan Africa is not known as a major centre of refining. Energy investment has focused more on the upstream sector than the downstream. Small, scattered markets and inadequate energy infrastructure has also discouraged the development of major refineries that can capture economies of scale by providing fuel to nearby markets. Many countries rely on small refineries for local fuel provision, with outlying areas reliant on imports. Nevertheless, many countries continue to regard having a refinery as being a key part of supply security, as well as perhaps being a point of national pride. The continent is therefore dotted with numerous refineries, many of which operate at low rates of utilisation, or operate only sporadically.

Crude capacity was expanded from 2.1 million bpd in 1980 to 2.9 million bpd in 2000. Capacity has varied in the 2.9 – 3.3 million bpd range during the 2000 – 2010 decade, as some plants have come onstream and others have been closed or temporarily mothballed. Crude throughput has varied in the 2.2 – 2.5 million bpd range during the same decade. By this measure, utilisation rates have been poor, averaging 72 – 77%. In spite of this, most of the countries remain determined to keep their refineries in operation, and many are enthusiastic about the prospect of building new refinery projects. The following section provides a brief summary of the refining industry in Sub-Saharan Africa.

Written by Nancy Yamaguchi, Hydrocarbon Engineering Contributing Editor.

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