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Africa's Oil Refining Ambitions Fade

Source: Reuters 12/20/2013, Location: Africa

Africa's efforts to supply more of its booming demand for fuel are being dashed by fierce competition from foreign oil refiners and traders flooding the $80 billion market with imports.

African governments want more oil refineries to cut fuel import bills and get better value from the continent's own crude.

But the investors they so badly need are either withdrawing or shifting their focus to trading or storage to take advantage of the region's demand growth of around 5 percent, higher than China and India.

For many distributors, it is cheaper to import fuel from refiners in India or the U.S. Gulf, and even China, than to source from old, often unreliable local plants.

"Our view is that growing African demand will by and large be met by imports," said CITAC's David Bleasdale.

The UK-based consultancy estimates that of a planned 1.1 million barrels per day (bpd) of new African refining capacity, only about a third, or 400,000 bpd, will likely be built.

India's Essar said in October it would exit from its 50 percent owned Mombasa plant in Kenya, the last refinery in east Africa, which it had planned to upgrade, saying that it was "not economically viable in the current refining environment".

Fuel marketers have boycotted puchases from the plant, blaming cost and quality, and instead upped imports from companies like Gulf Energy and Total.

Similar, upgrade projects such as Saudi Bin Laden Group's plans to quadruple output at Senegal's tiny 27,000 bpd refinery have never taken off. Even countries with a steady crude supply like Equatorial Guinea have abandoned projects, although big plants are proposed for oil producers Nigeria and Angola.

"Competition to supply Africa is only going to increase. Even if three projects do get built, there is no way they can keep up with demand growth," said Rolake Akinkugbe, Ecobank's head of oil and gas research.

The bank notes that over the last decade only 7 of 90 refinery projects in Africa were completed.

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