Total‘s stakes in refineries located in three African countries would likely become that of Nigerian energy and infrastructure conglomerate, Sahara Group, as both companies have begun the negotiation process.
Countries the refineries are located in: Sahara Group is interested in the French oil company’s stakes in refineries located in Cameroon, Cote d’Ivoire and Senegal. There are also plans take a controlling stake in Zambia’s only refinery.
The stake acquisition is part of an expansion plan
According to Tope Shonubi, Sahara Group‘s Co-Founder and Executive Director, who spoke at the sidelines of the African Refiners Association conference in Cape Town, the move is part of an expansion process that will see the stake of Sahara Group increase in these countries’ refineries.
Shonubi said investment in infrastructure is key and Sahara intends to upgrade these countries’ refineries – all of which predominantly run on Nigerian crude.
“The market has changed now. From your traditional typical trading [house], now you have to invest in infrastructure and provide some sort finance. The market has evolved. You cannot just trade alone. There must be added value.
“Our objective is to upgrade all these refineries. It is strategic for us to be shareholders; it is strategic to ensure that because of our participation in the value chain and both in the crude supply and in products we have to make sure we have to maximise what we are doing.”
Stakes of Sahara Group and Total in the African countries
Sahara Group’s current stake: It was reported that Sahara Group has less than a 10 per cent stake in the 75,000 barrels per day refinery in Abidjan, Cote d’Ivoire, and the 27,000 bpd refinery in Dakar, Senegal. Also, Sahara is in talks to acquire 70 per cent stake in the 25,000 bpd Indeni refinery from the Zambian Government – the deal is likely to be completed in the coming months.
Total’s stake in same countries: Total owns a 19.71 percent interest in Sonara, Cameroon’s only refinery, a seven per cent stake in the Societe Africaine de Raffinage refinery in Senegal, and has a 20 per cent holding in Societe Ivoirienne de Raffinage, which owns and operates Cote d’Ivoire’s sole refinery in Abidjan.
Sahara Group advocate for unified standards across Africa
A bigger and more effective regional market awaits African countries if they should adopt unified standards across the continent, Shonubi said. He said this will enhance Africa’s competitive positioning in global energy markets.
According to Shonubi, there’s a stumbling block to accessing the benefits that could accrue from intra-regional trade in the sector because of a fragmented petroleum products market with different product specifications, sulphur content and emission requirements.
“The adoption of similar specifications and standards has been achieved across Europe and most of North America, creating a single larger market for petroleum trade.
“While diesel specifications remain fragmented across Africa, jet fuel specifications are almost completely unified across the world. This similarity has improved the ease of trading jet fuel across borders, ensured access to a wider market and enhanced competitiveness in the aviation industry.”
He suggested African countries should adopt the AFRI-4 standards, which were the outcome of a partnership between ARA and the World Bank to promote the adoption of a single standard for cleaner fuels.
The benefit of adopting the AFRI-4 scheme: This, Shonubi said, will guarantee unified product standard across the region, ease of intra-regional petroleum product trade, reduction in bulk transportation costs and optimisation of regional infrastructure, as well as making Africa a more influential economic bloc.
Adding to the advantages of adopting the AFRI-4 standards, Shonubi said local refining capacity will be increased, landing costs of petroleum products will be reduced, ensure joint infrastructure projects as well as export diversification and access to a larger customer base.