May 26, 2024

#OTLAfrica: Experts urge African oil-producing countries to add value to hydrocarbon resources, wean continent off imported fuel, massively cut down FX 

Temitayo Ogunbanjo, Aradel Plc, General Manager, Refinery and Engr. Momoh Oyarekhua, President Crude Oil Refiner Association of Nigeria

Oredola Adeola


African oil-producing countries, including Nigeria, have been advised to focus on adding value to their hydrocarbon resources to address the energy deficit, ensure energy sufficiency, and entrench energy security, being part of the move to spur economic growth and industrialization in the region.


This was the major highlight of the discussion session on African Refining: Regional Sufficiency amid Global Energy Transition,” at the ongoing Oil Trading and Logistics (OTL) Africa Week 2023 in Lagos.


In his presentation, Temitayo Ogunbanjo, Aradel Plc, General Manager, Refinery, called on players in the petroleum industry in Africa to prioritize energy transition in a just manner that guarantees energy security for the growing African population.


According to him, Africa’s share of the world’s population is set to reach close to 40 percent, reaching close to 2.5 billion by the end of the century. He stated that as the African population grows, the demand for oil and other resources will increase.


“We need to be prepared to make changes and have a just energy transition that speaks to our needs and meets our energy security as a continent.


“A lot of our consideration for transition in Africa must be the one that is mindful of the continent’s energy security and addressing the huge energy deficit. Our energy resources should be explored in such a way as to help find the balance between energy sufficiency and security without leaving out the effect of climate change and energy transition.


“Around Over 600m Africans without access to electricity. Therefore, our hydrocarbon resources must be used for electricity access for over 70 million people every year to ensure that universal access to affordable electricity is achieved by 2030.


“Over 900m Africans out of 2.3 billion people globally without access to clean cooking facilities, relying instead on the traditional use of solid biomass, kerosene, or coal as their primary cooking fuel.


“Over 50% of energy consumed in Africa fueled by biofuels and waste (with Oil & Gas fuels contributing less than 40%). Therefore, converting consumption from biofuels/waste to gas and oil derivatives greatly reduces CO2 emissions and helps our transition.


“African gas produced sustainably and environmentally within the continent to close up the deficit and provide access to clean cooking and therefore eliminating the 2.5 million premature deaths per year linked to household air pollution, mostly from cooking smoke,” he said.


He therefore called for the urgent need for players in the continent to simplify the switching from the traditional use of biomass to cleaner options with investment in refining capacity and value added to the available energy resources.


Ogunbanjo further stated that over the last 30 years, the oil and gas component of energy supplied in Africa has been more than 40 percent, He added that the energy transition efforts must therefore be structured in a manner that allows us to scale up value addition to our hydrocarbon resources.


He said that the demand for crude oil in Africa at the moment is 4.5 million barrels per day, emphasizing that as the African population grows, the demand for oil and other resources will increase.


The solution according to Ogunbanjo is for the continent to scale up hydrocarbon production, with intentional investment in infrastructure for value creation to balance economic growth with sustainable development and the transition to clean energy.


Speaking about the efforts that Aradel Plc is putting in place to scale up value addition, Ogunbanwo said that his company has increased its refinery production from 1,000 barrels per day in 2010 to 11,000 bpd in 2020 with the addition of two trains of 5,000 barrels per day each capacity.


“We are a fully integrated company with marginal field and modular refiners committed to producing petroleum products sustainably and environmentally. We are working on additional train to be able to produce Premium Motor Spirit(petrol). This is scheduled for completion and start by mid 2024.


Engr. Momoh Oyarekhua, President Crude Oil Refiner Association of Nigeria, who doubles as the Managing Director, OPAC Refinery Limited, during the panel session huge African leaders to wean the continent off importation of foreign fuel and massively cut down the continent’s import bill.


Engr. Oyarekhua also highlighted the lack of an African crude oil index to support local production, which is why Nigeria and other African oil producers are trapped as there is no discount on the crude oil that goes into the refineries.


He noted that the world and the drivers of the 21st century are creating their market, and oil was developed to protect the interests of the developed world.


He explained that the production of oil came up as a result of industrialization when the whites thought there was a need for oil to support the equipment that they were producing, and this led to petroleum.


The Managing Director, OPAC Refinery Limited, therefore stated that if crude oil is produced, something must be done with it, and that is what brought refining into the picture. He added that after refining, the downstream, someone has to take the product to the end-users which is why the downstream operators are an essential component of the entire value chain.


Engr. Oyarekhua, further suggested that Nigeria as the continent’s biggest economy needs to deal with its refined product dependency by prioritising the concerns and needs of investors willing to create value out of its present huge reserve of crude oil and gas.


He said, “OPAC for instance has been struggling since it commenced operation till now in sourcing enough crude oil from the various fields located within its refinery sites. This according to him is because most of the independent crude oil producers prefer payment in United States dollars and are not willing to sell domestically in the local naira currency.


“Since we are not producers of crude oil, the Nigerian Government needs to intervene in our operations by encouraging the independent crude oil producers to allow us to settle the crude oil payment for our refinery in Naira.


“Our refinery is strategically established to support the government to substitute locally produced products for imported products,


Engr. Oyarekhua expressed his frustration that the Government does not understand the economics behind local refining and supporting the local currency.


He emphasized that having refineries is not just about producing oil but also about taking about 40% of the foreign exchange used in importing refined petroleum into Nigeria.


President Crude Oil Refiner Association of Nigeria emphasised that if Nigeria can reduce the 40% foreign exchange exposure from importing and subsidizing finished petroleum products, it will save the country’s revenue and foreign exchange.