Africa: Slow to shake off oil product imports

The demand for oil products and chemicals in Africa is growing faster than in any other region of the world.

The result ought to be a vibrant marketplace, however, supplies are held back by the lack of local production and imports of refined products.

To energize, the industry requires heavy investment in its refining infrastructure and greater storage capacity.

Current Situation

Africa’s growing middle class is increasing the demand for petrol and aviation fuel. As the continent becomes more prosperous, consumption is increasing, which ramps up the need for diesel and bunker fuel.

Africa ought to be able to meet this demand from its own crude – the continent produces 3.5 times as much oil as it consumes, according to Oil and Gas Journal Financial Journal, June 23. However, the aged local refineries are creaking – while Europe and Asia have invested in their refineries, African capacity is only expected to grow by 46,000 barrels per day by 2016.

The existing infrastructure relies on out-of-date technology and in places, such as Nigeria, insurgent groups bomb its oil pipelines. As a result, it is cheaper and more reliable to import refined products. As well as being highly inefficient, imports require their own infrastructure, such as terminals and storage facilities.

For oil storage companies looking to develop and lease out new tank capacity, Africa’s lack of infrastructure and relatively weak domestic demand mean it is challenging to forecast a reasonable return on investment.

Some new facilities are on the way, however; in South Africa’s Saldanha Bay port, Oiltanking Grindrod Calulo plans to construct a US$190 million commercial crude oil storage and blending terminal for West African and South American crudes.

Vitol Tank Terminals International has unveiled a US$60 million oil storage facility with 111,000 cubic meters (111 million litres) capacity at Mombasa, Kenya, to meet increasing demand across East Africa.


Although there is the need for new refineries, Africa is expected to have only three new refineries by 2020 – and the earliest is not expected to be commissioned until 2017. As a result, the current reliance on imported products is set to continue.

Investors need to weigh up potential revenue against the high cost of refinery construction and issues concerning political instability, corruption, limited local skilled labour, bureaucracy and understanding local culture.


Despite the potential pitfalls, there are signs of success. In Nigeria, Aliko Dangote has set out to end the need for Africa’s largest oil producer to be its second largest importer of refined petroleum products. The country’s three state-owned refineries operate at just 18% capacity, so Dangote – Nigeria’s richest man – plans to build his own, which should produce around 400,000 bpd of petroleum products by 2016.

Kenya is developing its own oil industry and plans to build a new refinery at the port of Lomu, where it will also build a storage facility. A pipeline is planned to connect the new infrastructure with Kenyan and Ugandan oil fields.

There remains the opportunity for other investors with deep pockets to develop oil storage, pipeline facilities and refineries around the continent as the demand is set to grow.