Oil projects: ARDA seek options for Nigeria, Africa downstream oil sector

The African Refiners and Distributors Association (ARDA) have raised alarm over the impacts of Environmental, Social, and Governance (ESG) issues on financing for oil and gas projects, insisting that unless borrowers like Nigeria and other African oil producers quickly adapt, securing necessary funding for the sector may remain very difficult.

In the face of huge refining, storage and supply deficits, over $15.7 billion (+/- 50 percent) is reportedly needed to upgrade the existing refineries on the African continent alone to produce cleaner, AFRI-6 fuels (10 ppm sulphur content)) fuels, a clear focus on the ESG contributions of such projects is imperative. Over $160 billion projects are currently under financial threat in Nigeria’s upstream oil sector even as the Organisation of Petroleum Exporting Countries (OPEC) said oil nations might find it difficult to raise the over $12.6 trillion needed for oil and gas investment before 2045.

Anibor Kragha, executive secretary of African Refiners and Distributors Association (ARDA), while speaking on the ‘Implications of ESG Standards on Global Oil & Gas Project Financing,’ stated that attracting funding into Nigeria and other African oil producing countries may become tougher without strong consideration for emissions reduction, social development and governance.

Kragha reiterated that financing of the oil and gas sector is in a state of transition, a development which is forcing closure of traditional sources of capital, especially from the World Bank and other national and international development finance institutions (DFIs).

The impacts of the ESG, according to him, mean that projects seeking funding must account for enhanced health, safety and environment standards with due diligence and reporting requirements , as well as updated Equator Principles (EP4), which all combine to impact financing costs.

According to Kragha, investors must now demonstrate how their HSE and Corporate Social Responsibility (CSR) practices contribute to return on investment and business performance. “Covid-19 and the war in Ukraine have more than ever highlighted the need for refining petroleum products in Africa. We can’t expand our capacity without finance. For us to get sustainable finance we must prioritize HSE”.

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Derek Campbell, executive chairman of Energy & Natural Resource Security, Inc. (ENRS), said Nigeria and other countries have more to worry about on the security of energy infrastructure. According to him, stakeholders in the sector must prioritize physical and cyber risk mitigation solutions for critical energy infrastructure and natural resource assets.

While speaking on ‘Energy Security: The Protection of Critical Energy Infrastructure and Natural Resource Assets,’ Campbell decried persistent vandalism of infrastructure in the Niger Delta.

Stating that cases of security attacks, including drone attack on oil facilities in Saudi Arabia, METCALF Power Station sniper attack, ransomware attack on Sonangol in 2019 cost the sector huge losses, Campbell said there is lack of domain awareness in the sector.

Campbell sees Energy Security Risk & Resiliency Assessments (ESRRAs) as a practice that countries must now prioritize to avert growing dangers to critical energy infrastructure.

Janet Ruettiger, offering manager for Honeywell UOP’s thermal oxidizers business, stated that UOP’s new technology would provide solutions to help the refining sector achieve emission specifications more efficiently and more economically with less environmental impact.

With the approach, Ruettiger said organisations could rethink the way waste management is approached across refineries, stressing that it enables waste management to be integrated with the design of the Process Units, thereby providing opportunity for optimization and improvements.

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