BusinessDay
NigeriaDecides2023

Group urges governments to address petroleum storage, distribution infrastructure

Worried by the ongoing Russia/Ukraine war, stakeholders and African Refiners and Distributors Association (ARDA) have urged governments on the continent of Africa to address petroleum storage and distribution infrastructure.

The group said it was worried over energy security in Africa as petroleum products infrastructure, especially for storage and distribution threatens the continent’s growing demand and surging population.

While the International Energy Agency (IEA) sees energy security as ‘Uninterrupted availability of energy sources at an affordable price,’ stakeholders at the African Refiners and Distributors Association (ARDA) are worried that most countries in Africa are open to energy insecurity shocks because of the inadequacy of storage and distribution infrastructure.

Speaking at an ARDA workshop on Storage and Distribution, Anibor Kragha, executive secretary of ARDA, decried port-related challenges even as the continent’s available petroleum products storage infrastructure remained a serious concern.

Kragha had seen the need for investment in modern infrastructure as leeway for the attempt to transition to cleaner energy sources as part of measures geared towards meeting UN Sustainable Development Goals (SDGs) and mitigating deforestation.

He noted the need for coordinated Storage and Distribution strategy, and investments across the continent to support the projected increase in future petroleum products demand across Africa.

Speaking on the ‘Role of Storage and Distribution in ensuring Energy Security in Coastal and Inland Countries,’ James McCullagh, the executive director, CITAC Africa, said that Africa would need reliability, adequate pricing and strong Health, Safety and Environment (HSE) practices.

According to him, the Ukraine crisis coming at a time when a lot of refineries are shut down amidst low stock capacity created more worries for Africa.

To him, minimum stock holding requirements would provide a buffer against supply shocks, noting that this would require a line item in national price structures.

He stressed on the need for a regular forward-looking scenario of about five to 10 years to guide investment planning and regulatory framework.

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McCullagh called for decentralised supply chains, diversification of transport modes as well as energy sources.

Speaking on how the Russia/Ukraine crisis amplifies market energy trends, James Gooder, VP Crude at Argus noted that the Ukraine war worsened development in Africa with diesel prices the worst hit.

Gooder noted that while global oil demand is still in recovery mode, crude supply has struggled to keep up.

Noting that the development had recently pushed crude prices in Atlantic Basin to hit record highs when compared with datedBrent, which was itself elevated against ICE Brent, West Texas Intermediate and Dubai, he stated that Urals prices of CIF NorthWest Europe (NWE) no longer reflect value of similar crudes.

Gooder, who noted that supply chain issues increased the challenges for Africa said changing flows meant that higher freight rates are worsening product price spikes in Africa.

In a joint presentation, experts at Vitol, Maryro Mendez and Michael Curran stated that the uncertainties in storage and distribution are plenty, stressing however that the risk is increasing.

Disclosing that the market entered a tightening cycle already before the invasion of Ukraine, they stated that oil on water had increased due to re-routing of Russian exports.

According to them, by the end of 2023 over three million barrels per day of refining capacity is due to close when compared with 2019 which could have further impacts on the overall supply chain.