Most refineries in Africa
tend to be medium to large-scale refineries, perhaps because of the state of
technology at the time they were built. This article is about presenting a
cost- effective and timely option, as represented by the modular refining format.
Review of Crude Oil
Refining in Africa:
There are a total of 42 refineries in Africa, with a total name-plate capacity of 3,217,600 barrels per day (bpd). The major refining countries are Egypt with 9 refineries (774,900 bpd); Algeria with 5 refineries (303,700 bpd); Libya with 5 refineries (380,000 bpd); South Africa with 4 refineries (545,000); and Nigeria with 3 refineries (445,000 bpd). More than half (i.e. 51.7%) of Africa’s refining capacity is in North Africa. According to McKinsey’s database, most of these are State-Owned (59%). 29% are based on joint ownership with government and 12% are joint-venture arrangements between International Oil Companies (IOC’s).
There are a total of 42 refineries in Africa, with a total name-plate capacity of 3,217,600 barrels per day (bpd). The major refining countries are Egypt with 9 refineries (774,900 bpd); Algeria with 5 refineries (303,700 bpd); Libya with 5 refineries (380,000 bpd); South Africa with 4 refineries (545,000); and Nigeria with 3 refineries (445,000 bpd). More than half (i.e. 51.7%) of Africa’s refining capacity is in North Africa. According to McKinsey’s database, most of these are State-Owned (59%). 29% are based on joint ownership with government and 12% are joint-venture arrangements between International Oil Companies (IOC’s).
These national refineries operate at different levels of
efficiency. Considering data of average national capacity utilizations from
2006-2009 (Oil & Gas Journal refineries survey), the efficiency levels for
these countries are: Egypt (81%), Algeria (94%), Libya (87%), South Africa
(85%), and Nigeria (18%).s
In the past 20 years, only 3 Greenfield refineries have been
constructed in Africa. These were built in Adrar (Algeria) and Khartoum (Sudan)
with China National Petroleum Company (CNPC) partnering with the governments,
with capacities of 13,000 bpd and 100,000 bpd respectively. The third one was
built in Alexandria (Egypt) by Egypt General Petroleum Corporation, Egypt’s
national oil company (NOC) with a capacity of 100,000 bpd. Planned new builds
were constructed by Petrochina at Ndjamena (Chad) and Zinder (Niger) with same
20,000 bpd capacity. The third is being constructed by Sonangol, Angola’s NOC
at Lobito (Angola) with a capacity of 200,000 bpd. From the foregoing, refining
in Africa is led by NOC’s, and new investments are dominated by the Chinese
National Petroleum Companies.
Big Capacity Refineries versus Modular Refining Format
The capital outlay for any 100,000 barrel per day (bpd) refinery is about $1.5 billion, while a 24,000 bpd modular refinery is roughly $250m. Therefore, it is easier to access funds for the modular refining modules (through US Ex-IM Bank). The manufacturing timescale for plant, equipment and machinery for a plant of 100,000 bpd capacity is within the range of 3-4 years. Start-up for modular refineries of 24,000 bpd capacities is within a timeframe of 18-20 months. The modular system allows the plant to be expanded to 100,000 bpd capacity in structured increments. The increments can be funded with the cash flows from phase 1 and additional phases, and so the refinery will not incur additional debt for the expansion after the first unit is installed. Unlike big capacity refineries, the expansion of the modular plant capacity can be done without shutting down production from existing equipment and plant.
Big Capacity Refineries versus Modular Refining Format
The capital outlay for any 100,000 barrel per day (bpd) refinery is about $1.5 billion, while a 24,000 bpd modular refinery is roughly $250m. Therefore, it is easier to access funds for the modular refining modules (through US Ex-IM Bank). The manufacturing timescale for plant, equipment and machinery for a plant of 100,000 bpd capacity is within the range of 3-4 years. Start-up for modular refineries of 24,000 bpd capacities is within a timeframe of 18-20 months. The modular system allows the plant to be expanded to 100,000 bpd capacity in structured increments. The increments can be funded with the cash flows from phase 1 and additional phases, and so the refinery will not incur additional debt for the expansion after the first unit is installed. Unlike big capacity refineries, the expansion of the modular plant capacity can be done without shutting down production from existing equipment and plant.
Revenue streams and pay-back periods are faster with the modular
refining format, than with the larger capacity refineries. The major
short-coming with the modular format is that the plants are semi-automated and
less labor-intensive, i.e. not many jobs can be created directly. For instance,
20 to 30 personnel can operate a 24,000 bpd modular refinery. Most of the
spin-off jobs created are of a secondary nature, and based on the location of
the site.
In summary, modular refineries are simple, efficient and fast to
start up. Such refineries usually operate at optimal capacity at all times. The
relatively small investment cost allows for private investors to enter the
refining business much easier. It also enables government to build the bigger
capacity refineries using the modular format, but in incremental stages. However,
government- built modular refineries should have full conversion facilities
(i.e. catalytic reformers and naphtha hydrotreaters) to enable the refineries
produce sufficient PMS.
African Oil Refining
Model Worth Considering
There is a current over-reliance on government- owned refineries. Africa can also adopt a refining model that relies on modular refineries (built and operated by private investors) that will produce all refined products with the exception of petrol (PMS). The implication is that the modular refinery operators will not have to invest in catalytic converters and naphtha hydrotreaters that are required to convert naphtha to petrol. These equipments are capital intensive and complex. Therefore, the exclusion of such facilities in a modular refinery plant will further reduce the cost of set-up. This will enable the modular refiners to focus on producing diesel, marine diesel, dual purpose kerosene (DPK), aviation turbine kerosene (ATK), and low-pour fuel oil (LPFO).
There is a current over-reliance on government- owned refineries. Africa can also adopt a refining model that relies on modular refineries (built and operated by private investors) that will produce all refined products with the exception of petrol (PMS). The implication is that the modular refinery operators will not have to invest in catalytic converters and naphtha hydrotreaters that are required to convert naphtha to petrol. These equipments are capital intensive and complex. Therefore, the exclusion of such facilities in a modular refinery plant will further reduce the cost of set-up. This will enable the modular refiners to focus on producing diesel, marine diesel, dual purpose kerosene (DPK), aviation turbine kerosene (ATK), and low-pour fuel oil (LPFO).
On the other hand, the NOC refineries can focus on PMS
production and become essentially transformed into PMS complexes instead of
full conversion refineries. In this case, NOC refineries will buy all the
naphtha feedstock from the modular refinery operators and convert these to PMS.
Other products that NOC refineries can produce will include fuel oil, bitumen,
asphalt, and petrochemicals. The major downside to this proposed model of
refining is the transport cost of moving naphtha from each modular refinery to
the NOC’s PMS complexes. To mitigate the transport costs, modular refineries
can be strategically located near the source of crude oil feedstock and the
NOC’s PMS complexes. This proposed interdependence between private modular
refiners and State-Owned refineries is likely to ensure sustainable
availability of petroleum products in Africa.
Hurdles and the Role of
Government
The major hurdle to implementation is political in nature. Petroleum products, by their characteristics, are linked to all transport systems and so private ownership of refineries carries with it some national security implications. Secondly, the daily cash flows that attend such business will likely confer enormous political capital and influence on private owners. As a result, government officials are unlikely to provide a clear framework and incentives that permit indigenous private investment in the refining business. However, governments in Africa can also adopt the modular refining format in constructing medium to large-scale refineries and in partnership with Chinese NOC’s.
Dr Chijioke Nwaozuzu, a
petroleum policy expert wrote from Port Harcourt
The major hurdle to implementation is political in nature. Petroleum products, by their characteristics, are linked to all transport systems and so private ownership of refineries carries with it some national security implications. Secondly, the daily cash flows that attend such business will likely confer enormous political capital and influence on private owners. As a result, government officials are unlikely to provide a clear framework and incentives that permit indigenous private investment in the refining business. However, governments in Africa can also adopt the modular refining format in constructing medium to large-scale refineries and in partnership with Chinese NOC’s.
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