• Wednesday, July 24, 2024
businessday logo

BusinessDay

Why ‘refinery of the future’ is critical in Africa – ARDA

Why ‘refinery of the future’ is critical in Africa – ARDA

With growing energy demand and rapidly rising population over next two decades, the African Refiners and Distributors Association (ARDA) has said delivering “Refineries of the Future”, which produce cleaner fuels in the near-term while also focusing on higher value petrochemicals, is the continent’s best option to lowering the environmental footprint of the refineries and averting serious potential public health issues.

Anibor Kragha, executive secretary of ARDA, in a presentation at the Africa Energy Futures Forum held recently during the 23rd World Petroleum Congress in Houston, USA, said it has now become imperative for African countries to adopt a unique Energy Transition Plan that promotes cleaner transport and cooking fuels in the near-term while taking on proven, cost-effective renewable energy solutions in the mid-to-longer term.

Kragha also stated that the path to delivering this African Energy Transition Plan will require an accompanying finance plan which will promote investments in world-class, integrated refinery and petrochemicals complexes as well as critical LPG storage and distribution infrastructure.

With only 20 countries in Africa have refining operations, with their capacity utilization down to 55 percent on average, Kragha stated that existing refineries will need to be upgraded to produce AFRI-6 (10 ppm sulphur) fuels in line with ARDA AFRI Fuels Roadmap, while new refineries, like the Dangote Refinery in Nigeria and the ERC Refinery in Mostorod, Egypt, will be designed to produce these cleaner fuels.

Read also: Dangote refinery, not silver bullet to solving Nigeria’s FX crisis – Bismarck Rewane

Kragha also lamented the current situation whereby only six African nations have LPG storage capacity above 50,000 metric tons (MTs) leading to uneconomic cargoes and increased LPG landed costs.

This overall situation has resulted in Africa petroleum products shortfall (demand vs. refinery output) growing significantly over the years which poses significant concerns for Africa’s energy security as the continent remains heavily reliant on imports.

Kragha stated that significant investments are required in integrated refining and petrochemicals plants to meet growing demand and reduce imports as well as in large-scale LPG infrastructure to effectively promote replacement of biomass with LPG as clean cooking alternative across Africa.

Kragha, who noted that Africa’s futuristic refineries must be flexible and efficient, said policies that would provide and enabling environment for investments, including clarity in regulatory frameworks and compliance requirements would help the continent to attract much-needed capital for future world-class refinery projects.

While stressing that measured, decade-by-decade Sustainable Finance Plan would be required to ensure investments are made to deliver unique African Energy Transition Plan, Kragha said digitalization, machine learning, decarbonisation, safety and reliability, efficiency and funding were key to refineries of the future in Africa. Kragha also stated that separate frameworks are required to promote cleaner transport and cooking fuels, lower-carbon power generation and renewables.

ARDA had previously stated that about $15.7 billion (+/-50 percent) would be needed to upgrade the existing 36 refineries on the continent.

The challenge will be to ensure that these refineries are converted into efficient centres of excellence wherein latest technology is used to deliver cleaner, higher-value products while significantly reducing emissions.

In addition, a further $7.5 billion has been estimated by the Shell Foundation as the requirement to displace charcoal with modern cooking fuels across Africa. Kragha said “Complex, inefficient supply chains and intra-African trade challenges are currently impeding implementation of cost-effective clean energy solutions, but the African Continental Free Trade Agreement (AFCFTA) presents opportunity for the African Union and the respective Regional Economic Commissions to implement a harmonised Energy Transition Plan.”

Ultimately, Kragha said, the “Refinery of the Future” will need to minimise production of fuels and instead focus on converting crude oil directly to petrochemicals via modern alternative technology and delivering higher capital efficiency via a lower overall environmental footprint.