Angola and Senegal start new oil refining projects and increase capacity

May 04, 2009 02:00 AM

The oil-rich African continent is expected to see rapid development in the oil sector with countries such as Senegal and Angola beginning to commission new oil refining projects and increase existing capacity. This move is expected to bring down gasoline imports and provide energy independence to these countries.
Angola, one of Africa's largest oil-producing countries, imports around 70 % of its gasoline demand from the US and presently has only one refinery, which has a capacity of 39,000 bpd located near the capital city, Luanda. The country's primary oil producer, Sociedade Nacional de Combustiveis de Angola (Sonangol) (Luanda), cognizant of the gap in demand and supply, is building a 200,000-bpd refinery with an investment of $ 8 bn.

The refining complex, known as "Project SONAREF" and located near the port city of Lobito, was initially estimated to cost $ 6.4 bn. However, the project was delayed for almost a decade, as it was not able to lure the interest of foreign investors.
KBR (Houston, Texas) has been awarded the contract to design the refinery, which will also include connectivity to marine offloading facilities and new roads that will assist in faster distribution in the country. The refinery complex will directly and indirectly employ 8,000 people. The plant is scheduled for commissioning by the end of 2011 and is expected to reduce gasoline imports within two years. About 90 % of the output from Project SONAREF will cater to domestic needs and demand from neighbouring countries. The remainder will be exported to other regions.

Oil is the lifeblood of Angola, accounting for 95 % of the country's export revenues and 40 % of its gross domestic product (GDP). Since the 1980s, the petroleum sector in the country has grown 25 % every year. As of January 1, 2008, the conservative estimate of Angola's oil reserves was about 9.04 bn barrels. However, industry experts indicate that with the recent discovery of new oilfields, the country's reserves could be as high as 20 bn barrels.
In September last year, Angola overtook Nigeria to become Africa's largest and the world's eighth-largest oil producer. Energy consultants Wood Mackenzie (Edinburgh, Scotland) forecast that Angolan oil production could reach 2.2 mm-2.3 mm bpd in the next five years. By 2015, the US is expected to import 25 % of its oil demand from Angola. Global players, keen on exploiting Angola's huge oil reserves, have increased investments in the country. Foreign direct investment in Angola's energy sector doubled to $ 36 bn between 2002 and 2007.

In another development, National Iranian Oil Refining and Distribution Company (NIORDC) (Tehran, Iran) entered into an agreement with Senegal's national oil company, Societe Africaine de Raffinage (SAR) (Dakar) to increase the capacity of an oil refinery in the country from 25,000 bpd to 64,000 bpd. NIORDC, which will hold a stake in the refinery, has also agreed to supply crude oil for a period of one year.
The supply from Iran will be made under special credit terms, which, among other conditions, will allow Senegal to benefit from the three-month credit period. NIORDC was established in 1992 and is part of the Iranian Ministry of Petroleum. The company owns and operates more than eight refineries in Iran. Iran also plans to build another refinery and petrochemical complex in Senegal.

Iran will invest $ 80 mm on a car-assembly facility to produce Samand cars. The investment will be made by Iran Khodro Company (IKCO) (Tehran), the country's premier automobile manufacturer. Founded in 1962, IKCO is the largest car producer in the Middle East, Africa and Central Asia. In July 2008, the company inaugurated its largest car assembly facility in Khorasan, Iran, which is expected to produce 100,000 vehicles by the end of this year.
This will help IKCO increase output to 1.13 mm units by 2012. IKCO plans to set up car assembly units in China and Egypt that are similar to the proposed facility in Senegal in order to produce Samand cars. The price of Samand model of car, which is built on Peugeot 405 technology, starts at $ 9,000.

These new projects come at a time when Nigeria, once Africa's largest oil producer, is facing violence, unrest and depleting reserves. As of January 1, 2008, Nigeria's oil reserves were about 32.93 bn barrels. Industry sources state that the reserves are diminishing at an annual rate of 2 %. Current reserves run the risk of drying up within the next 50 years, which has made the discovery of new reserves critical.
However, the oil-rich Niger delta is facing rampant violence from groups demanding that the government share funds with oil-producing states. Oil infrastructure has been destroyed extensively, which has reduced production by 20 % in the last few years. More than 250 foreign nationals working on oil refinery projects in the country have been held hostage in the past two years. The Nigerian government, which has developed a new energy policy against the backdrop of the current precarious energy situation, hopes to bring the industry back on track.

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