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African refineries must upgrade in producing cleaner fuels to be future ready – Kragha

ANIBOR KRAGHA, executive secretary of the African Refiners and Distribution Association (ARDA), in this interview with IFEOMA OKEKE, speaks on how Africa can achieve the UN Sustainable Development Goals (SDGs) of having clean and affordable energy for all.

What role is your organisation playing towards cleaner energy across African countries?

African Refiners and Distributors Association (ARDA) supports the UN Sustainable Development Goals (SDGs) and global clean energy initiatives in the longer term, but our association’s current priority is meeting Africa’s petroleum products demand with cleaner fuels. As such, ARDA is presently focused on the African Union’s endorsement of the ARDA AFRI Fuels Roadmap and supporting ECOWAS Member States in their adoption of mandated cleaner AFRI fuels specifications.

In parallel, ARDA is actively working to raise sustainable financing for its Members’ downstream projects, developing LPG for clean cooking initiative(s) including conversion of municipal waste to bioLPG and promoting a unique African Downstream Energy Transition Roadmap targeting clean transport and cooking fuels (to reduce biomass use).

ARDA is also monitoring medium to longer-term cleaner energy solutions as global expertise increases and economic, scaled-up regional solutions become evident such as biofuels (local production, imports, blending and refinery conversion) and electric vehicles (EVs). In order for EVs to really take a hold, industrial and domestic electricity demand must first be met via cleaner power generation and economic regional & pan-African transmission infrastructure.

Read Also: DPR says it shut down 86 illegal LPG plants in Lagos last year

What are the issues, challenges and efforts being made across Africa in the sector?

Presently, the key challenges in the African Downstream Energy sector include poor global refining margins, urgent need to update refining units and improve operational efficiency, requisite upgrades to safety and environmental standards for refining, storage and distribution to align with global best practices. Others include delays in legislation for higher quality products and stricter vehicle exhaust emission controls, acceptance of market pricing for products and securing targeted financing for the downstream oil sector investments.

ARDA is presently working with the African Union, Regional Economic Communities (RECs), its members and other stakeholders on regional harmonization of clean fuel specifications to encourage inter-regional trade, address public health and cost concerns; clean cooking initiatives to drive LPG growth helped by infrastructure projects (import, storage and gas fractionation) and developing frameworks to encourage the requisite investments.

Sustainable finance is critical to energy transition. How exactly can we attract this investment in the face of the growing competitive investment destinations?

A review of financing allocated to the fossil fuel industry and green projects since the Paris Climate Agreement in 2015, shows a gradual decline in funds allocated to fossil fuel projects along with a corresponding rise in funds allocated to green projects. In fact, 2021 may be the year that a tipping point is reached where green projects finally receive more funding than the fossil fuels industry.

ARDA is advocating that its members should focus on ensuring all projects are commercially viable and have a definite ESG (Emissions Reduction, Social Development and Governance) focus. Investment decisions must be driven by both the end users and various stakeholders, including the requisite government support needed to ensure project success. The ARDA HSE & Quality (HSEQ) Work Group is focused on ensuring HSE becomes a license-to-operate issue for all our Members and stakeholders.

Simultaneously, the ARDA Sustainable Financing Work Group, which I lead, is focused on implementing a sustainable finance plan for Africa that incorporates funding from traditional sources like local and international commercial banks, but also an increased focus on alternative sources like Development Finance Institutions (DFIs), Export Credit Agencies (ECAs), Vendors & EPC Companies and Commodity Traders.

What are the implications of high-sulfur petroleum products and second-hand vehicles and the progress being made by ARDA in collaboration with African Union in reducing sulfur content in these products?

The fundamental issue with continued proliferation of high-sulphur petroleum products and older vehicles with poor emissions standards is a resulting increase in pollution that adversely impacts the air quality by increasing direct emissions of particulate matter from on-road traffic (public health issue) and black carbon emissions (climate pollutant).

ARDA has been collaborating with the African Union since 2019 on adoption of the ADRA AFRI Clean Fuels Roadmap which targets harmonized, pan-African AFRI-6 (10 ppm Sulphur) fuel specifications by 2030, stricter vehicle emission standards and import restrictions on vehicle age and quality. The Roadmap is presently being reviewed by the AU Specialized Technical Committee of African Energy Ministers and we believe that the process for AU endorsement is progressing well.

ARDA is also working with the UN Environmental Program (UNEP) and the Partnership for Clean Fuels and Vehicles (PCFV) on a systems approach to promote cleaner fuels and cleaner vehicle technologies to reduce vehicle emissions and improve health, local air pollution and climate benefits.

Compared to demand, Africa has limited refining capacity and most refineries don’t conform to the best standard in terms of environmentally friendly fuels. How do we address this problem?

ARDA and the African Union conducted a study to assess the cost implications of upgrading the refineries on the continent to produce cleaner, low-sulphur fuels, specifically AFRI-6 standards (10 ppm Sulphur).

The study estimated a total of about US$ 15.7 billion (+/- 50%) to upgrade the refineries to produce AFRI-6 fuels. This US$ 15.7 billion (+/- 50%) is an estimate only and final numbers will be determined by the respective refineries upon engagement of their respective EPC contractors.

African refineries must be upgraded to produce cleaner fuels and ARDA’s Sustainable Financing Work Group, which I lead, is focused on developing frameworks incorporating traditional (banks) and non-traditional (DFIs, ECAs, Vendors, EPCs & Commodity Traders) sources of project financing.

How can Africa achieve the UN Sustainable Development Goals (SDGs), especially UN-SDG 7 (Clean and Affordable Energy for All), which relate to affordable and clean energy, knowing very well that this goal alone is crucial to the realization of other goals such as poverty alleviation, good health and well-being, climate change, decent work and economic growth and others?

Presently, Africa’s high use of solid fuels (biomass) for its primary energy needs has huge negative impacts both on the continent’s citizens and the climate. Over 850 Million Africans (80 percent of Africa’s population) uses solid fuels (wood and charcoal) for their primary cooking needs resulting in 600,000 Africans being killed annually from household air pollution (2nd largest health risk in the region).

As a result, ARDA considers LPG for Clean Cooking as the best near-term opportunity for Africa to make significant strides in reduction of its GHG emissions as well as improve the overall health and well-being of the continent’s citizens. ARDA is a member of the LPG4SDG7 Coalition which comprises key industry organizations (Global LPG Partnership, World LPG Association, Clean Cooking Alliance, Shell Foundation), banks, traders and other stakeholders focused on deploying actionable frameworks to promote adoption and growth of LPG for Clean Cooking across Africa.

Sub-Saharan African presently has over 14 percent of the world’s population, but only accounts for about one percent of global LPG consumption so the potential exists for significant growth in the African LPG sector over the next few decades.

Revenue generation for most African countries like Nigeria is still tied to fossil fuel. At a time that the rest of the world is aggressively moving away from these sources of energy, what are the options for African countries, especially countries like Nigeria?

The IEA Africa Energy Outlook 2019 clearly indicates that Africa’s energy demands are going to rise by 45 percent between now and 2040. In addition, despite renewables growing about 12 to 15 times the current levels, fossil fuels will still form about 60 percent of Africa’s primary energy mix.

As a result, African countries like Nigeria will still have a market for their fossil fuel-related petroleum products, but the focus should be on investments to deliver the ‘Refinery of the Future’ which integrates refining & petrochemicals complexes that produce cleaner, higher-value products (like gasoline and aviation fuel) and petrochemicals with lower environmental footprint(s). An example of this is the soon-to-be completed 650 kbd Dangote Refinery, and other refinery and petrochemical projects being built in Algeria and Egypt.

African countries should also focus on implementation of a unique African Energy Transition Roadmap that focuses on cleaner fuels and LPG for clean cooking in the near-term and modern energy solutions like renewables in the longer term. The roadmap should also include the required storage and distribution infrastructure investments and policies for implementation.

What is your take on electric vehicles and gas fired cars in Africa?

ARDA is presently focused on promoting cleaner fuels in the near-term and is monitoring the progress of Electric Vehicles (EVs) and gas-fired cars (i.e. cars powered by Autogas) as medium to longer-term cleaner energy solutions as global expertise increases and economic, scaled-up regional solutions become evident. In order for EVs to really take a hold in Africa, industrial and domestic electricity demand must first be met via cleaner power generation and economic regional & pan-African transmission infrastructure.

ARDA is supportive of plans in Nigeria for gas-fired vehicles as part of the recently announced ‘Decade of Gas’ initiative to significantly increase domestic gas utilization as well as Egypt’s on-going plan to covert about two million vehicles into dual-fired engines (fuelled by gasoline and natural gas) and build about 400 natural gas filling stations over the next few years.

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