Evans Muata, Vice President of the African Refiners and Distributors Association (ARDA) and CEO of INDENI Petroleum Refinery Ltd in Zambia, has stated that retrofitting ageing state-owned refineries is not a viable option for achieving energy sufficiency in Africa. In an interview with Kingsley Jeremiah, Muata discussed underperforming refineries, dirty fuel production, and the ambition to scale refining capacity by 3.9 million barrels per day.
Underperformance of Existing Refineries
Muata acknowledged that Africa has significant refining capacity on paper, but functionality is the real issue. Many refineries are partially operational or idle due to maintenance challenges, outdated technology, and lack of investment. He emphasized that refining is an evolving industry, particularly in response to environmental standards requiring cleaner fuels like low-sulphur products, which demand costly upgrades involving advanced equipment, high-pressure systems, specialized catalysts, and substantial hydrogen inputs.
For many state-owned refineries, such investments are not economically viable. The return on investment can take 40 to 50 years, discouraging both governments and private investors. As a result, these facilities gradually become obsolete. Muata argued that Africa needs modern, efficient, and commercially viable refining capacity, and in some cases, building new refineries is more practical than retrofitting old ones.
Cost of Upgrading to Cleaner Fuels
Upgrading refineries to produce low-sulphur fuels is extremely expensive. Muata explained that moving from high-sulphur to low-sulphur production requires advanced processing units, higher-grade materials, and significant energy input. Equipment must withstand high pressure and temperature, catalysts must be highly active, and hydrogen production via steam methane reformers adds further expense. These factors dramatically increase capital expenditure, making the economics unworkable for many older refineries with payback periods spanning decades.
Consequently, many African refineries continue producing higher-sulphur fuels, which are increasingly non-compliant with global standards and cannot compete with cleaner imports. Consumers often bear the costs, as cleaner fuels are more expensive. Governments may attempt subsidies or tax adjustments, but these measures are not always sustainable, highlighting a trade-off between environmental standards and affordability.
Scaling Refining Capacity: The Dangote Model
ARDA has stated that Africa may require six refineries on the scale of Dangote's facility, with an estimated cost of up to $120 billion. Muata described this as ambitious but realistic. He noted that Dangote's journey, initially met with widespread scepticism, demonstrated that such projects are possible through vision, persistence, and alignment between market need and strategic execution. The Dangote refinery emerged at a critical time, with increasing global supply risks due to geopolitical tensions, offering a glimpse into how Africa can insulate itself from external shocks.
Muata believes that while the scale of investment is enormous, the ambition can be realized. The demand for refined petroleum products across Africa is substantial and growing. The challenge lies not in the absence of opportunity but in structuring bankable projects.
Investment Challenges and Opportunities
Many banks were reluctant to support the Dangote refinery at inception, but the project proved its viability. Muata noted that future projects will require innovative financing, such as aggregated capital from private equity, institutional investors, public offerings, and strategic partnerships. Initial public offerings (IPOs) could pool resources from multiple investors. The market fundamentals are strong: Africa's young, growing, and increasingly urbanized population will continue to drive energy demand.
Role of Governments vs. Private Sector
Muata argued that it is difficult for governments to lead refining initiatives successfully due to competing fiscal priorities. Government-owned refineries have struggled despite significant investment, often lacking commercial discipline and maintenance. Private capital, with a clear focus on returns and operational efficiency, will likely drive the future of refining in Africa, supported by government policy frameworks.
Crude Oil Supply and Security Risks
Africa's oil infrastructure was designed for export, but domestic demand is rising. Muata stated that pipelines and supply chains can be reconfigured to prioritize domestic refining, driven by market forces. Regarding security risks like pipeline vandalism and political instability, he emphasized that these are governance and enforcement issues that can be managed with appropriate security frameworks and political will.
Key Takeaways from ARDA Week
Muata highlighted several takeaways: Africa's vulnerability to external supply disruptions, the need for regional solutions like the Dangote refinery and refining clusters, and a growing confidence among African stakeholders in defining their own strategies. He concluded that Africa is beginning to listen to its own voice, which is perhaps the most significant takeaway.
