Former Chief Operating Officer (COO) in charge of refining and petrochemicals, Nigerian National Petroleum Company Limited, Anibor Kragha, is currently the executive secretary of the African Refiners and Distributors Association (ARDA). In this interview, the oil and gas expert discusses issues bedeviling the downstream petroleum sector in Africa, especially growing population, refining capacity, supply and storage bottlenecks and associated looming health problems. Excerpts by SEYI JOHN SALAU:
What would you say are your achievements since you assumed office as the executive secretary of ARDA and what plan do you have going into the future?
The African Refiners and Distributors Association (www.arda.africa) was created in 2006 as the African Refiners Association (ARA), primarily to promote sharing of technical and commercial best practices amongst African refiners and their stakeholders. The “ARA” name was changed to “ARDA” in 2017 to reflect the complete
Downstream supply chain which includes African refiners, independent marketers, distributors and regulators. ARDA, which currently has 74 Members in 52 African countries, is based in Abidjan, Cote d’Ivoire and is the first-ever pan-African non-governmental organization that serves as the voice of the Downstream oil sector in Africa that focuses on addressing the economic, environmental and social issues that impact upon oil refining and importation and distribution of petroleum products across the African continent.
Given my prior role as NNPC Chief Operating Officer (COO), Refining & Petrochemicals from 2016 to 2019, I served first on the ARDA Executive Committee and then as ARDA President from 2019 to 2020 ahead of taking on my first 3-year term as ARDA Executive Secretary from April 2020 to March of this year. After taking on the Executive Secretary role at the start of the COVID-19 pandemic, I was successfully re-elected for a second 3-year term at the ARDA AGM in March 2023.
I believe that, with the strong support of the ARDA President, the ARDA Executive Committee, Members and key partners and other stakeholders, I was able to lead ARDA to accomplish three main objectives:
First, ARDA used the challenge of the global COVID-19 pandemic to re-assess its operating model and develop a five-year strategic plan that focused on implementing ARDA’s Vision of serving as the leader for Africa’s transition to cleaner fuels and later, towards renewable energies. To accomplish this, ARDA reorganized and expanded its Work Groups (WGs) from five (5) to seven (7) – Refining & Specifications, Storage & Distribution, Human Capital, Regulation, HSE & Quality (HSEQ), LPG and Sustainable Financing (SF) – with the last three (HSEQ, LPG, SF) being new WGs aimed at introducing the broader global focus on ESG frameworks, cleaner transition fuels and climate financing to the Association’s Members and stakeholders. The Association also introduced its innovative ARDA Virtual Work Group Workshop Series in 2021 – a series of one-day, virtual workshops by each of the seven ARDA WGs – to enable its Members to continue to share best practices on key industry issues on an accessible virtual platform. The third edition of this virtual Workshop Series is being held from April to June this year with key topics based on the 2023 ARDA Week conference theme of “Balancing Energy Transition and Energy Security for the African Downstream.”
Second, ARDA has expanded its pan-African and global collaborations to promote pan-African energy security, a topic that has become increasingly important over the last year given the adverse impact of the Russia-Ukraine conflict on global petroleum products supply chains. During my first term, ARDA built key relationships with leading organizations and partners like OPEC, African Union Commission (AUC), African Petroleum Producers Organisation (APPO), Oil Sustainability Programme (OSP) of Saudi Arabia, African Energy Chamber, IEA, IPIECA, World LPG Association Global LPG Partnership, Clean Cooking Alliance, Shell Foundation, African Development Bank, Afreximbank and Africa Finance Corporation as well as leading oil trading firms, EPCs, technology providers and African and International NOCs and IOCs amongst others. These broad collaborations resulted in various partnerships to promote last-mile LPG adoption across Africa, green bioLPG produced from municipal waste and agricultural residue, and projects showcasing the need for strategic refining and regional storage and distribution investments on the continent.
Third, ARDA has expanded its cleaner fuels agenda to promote the African Downstream Energy Transition Roadmap focused on ensuring that our Members and key stakeholders have access to transition funding to implement their business plans in a global environment pivoting away from fossil fuel projects. Anchored on Africa’s population growth over the next few decades and the continent’s position as the lowest contribution to cumulative global CO2 emissions, ARDA is promoting the development and implementation of a unique, sustainable African Downstream Energy Transition Roadmap and associated Finance Plan that focuses on cleaner transport and cooking fuels first and the adoption of mature, cost-effective renewable energy solutions later. The Roadmap, which has the ultimate goal of enabling ARDA members to execute carbon emissions reduction and other projects that will generate carbon credits and result in an African, world-class carbon credits trading market. To that end, ARDA coordinated the launch of the SIR Refinery in Cote d’Ivoire’s Carbon Abatement Project last year by SIR, ARDA, Advisian and Vitol aimed at executing projects to reduce the overall carbon footprint of the SIR Refinery in Abidjan.
What is the current state of supply and storage infrastructure in Africa and what needs to change to address this issue in the downstream oil and gas sector?
Due to Africa’s projected increased population and associated demand over the next two decades, even with the new 650,000 barrels/day Dangote refinery, the continent will still have a huge reliance on imported petroleum products to meet significant shortfall (difference between products from African refineries vs. demand). The existing storage and distribution (S&D) capacity on the continent – ports, onshore depots and tank farms, pipelines, etc. – required to transfer petroleum products continent-wide are relatively old in most countries and need to be upgraded and expanded to ensure efficient, economic, safe, secure and sustainable delivery of petroleum products across Africa.
These actions are fundamental to rationalizing the supply chains and debottlenecking existing facilities to optimise efficient product delivery, while raising safety and security standards across Africa for both storage and distribution.
As an economic example, it has been estimated that increasing the minimum port depth of key African ports to 14 meters so that Medium Range (MR) tankers can easily berth would provide a potential cost savings of US$15 per ton of imported products, not including the significant reduction in the environmental risks associated with spills during Ship-to-Ship (STS) operations required when smaller tankers are used. For a country like Nigeria, which is the largest importer of clean petroleum products in Africa, the number is significant. In the push for energy transition, investments to improve energy efficiency of S&D operations regionally as well as to reduce emissions from tanks, road and rail wagons and pipelines, will be of paramount importance.
The importance of regional infrastructure, especially pipelines, to ensure that African countries can develop cross-border S&D facilities to enhance the viability of their investments and improve delivery of petroleum products. Collaborations resulting in the sharing of S&D infrastructure and raising safety standards amongst coastal and land-locked countries will be essential for seamless delivery of products continent-wide.
Africa is endowed with gas, but LPG penetration is dismal. What needs to change and what is ARDA doing to change this narrative?
LPG has been the fastest-growing petroleum product in Sub-Saharan Africa (SSA) over the last decade, where consumption has more than doubled since 2010. That said, per capita LPG consumption in SSA is the lowest in the world where the region has over 14% of world’s population yet only accounts for about 1% of global LPG consumption.
ARDA is currently working with its Members and various key stakeholders to promote the adoption of LPG as a cleaner cooking fuel (to replace biomass) and is championing key investments to expand LPG storage & distribution facilities across Africa. LPG and LNG are viewed as a cleaner transition fuel(s) for Africa and significant investments in LPG projects spanning storage, bottling, transport and bottle fleets are underway across Sub-Saharan Africa. This high level of activity will continue for the foreseeable future as per capita LPG consumption in Africa remains the lowest in the world.
In West Africa, Nigeria, Ghana and Senegal has very promising LPG markets and their respective governments have promoted policies to encourage LPG adoption. In Nigeria for example, local players like Rainoil, Techno Oil and NIPCO have invested in coastal LPG terminals, but more investments are needed to push LPG expansion across the country.
As stated earlier, ARDA and the Global LPG Partnership (GLPGP) are presently working on an Africa LPG Sector Development Fund to deploy financing for rapid scale-up of clean cooking with LPG in sub-Saharan Africa. The purpose of the Fund will be to provide critical technical advice and financing for qualified countries via their national LPG sector ecosystems.
Essentially, what is required is a coordinated regional long-term fiscal and marketing policy that brings together regional economic communities, national governments and industry to justify investments in supply, distribution, financing and marketing.
ARDA is currently working on two funding options for the downstream segment of the petroleum industry in Africa. Why is this critical and how will it impact energy security in Africa?
As stated earlier, ARDA is promoting the African Downstream Energy Transition Roadmap to ensure that its Members and key stakeholders have access to transition funding to execute their business plans. As such, ARDA is promoting two (2) Funds – one for refinery upgrades to produce cleaner fuels, Storage & Distribution Infrastructure and Petrochemicals projects and the other Fund dedicated to African LPG Sector Development.
ARDA and the African Union Commission conducted a study, funded by NNPC Limited, Trafigura and the Dangote Refinery, that determined that the cost of upgrading African refineries to produce cleaner, AFRI-6 (10 ppm sulphur) fuels was about US$ 15.7 Billion (+/-50%). As such, ARDA is proposing the development of the first Fund for bankable downstream projects across Africa, including refinery upgrade projects that deliver cleaner fuels while reducing the refineries’ carbon emissions and the continent’s petroleum products importation. In addition, strategic, preferably regional storage & distribution infrastructure investments and petrochemicals projects will be considered for their value addition.
ARDA and the Global LPG Partnership (GLPGP) and a leading African bank proposed the Africa LPG Sector Development Fund in 2021 to deploy financing for rapid scale-up of clean cooking with LPG in sub-Saharan Africa. The purpose of the Fund is to provide a critical mass of technical advice and financing for qualified countries via their national LPG sector ecosystems. Given that gas is now viewed as an essential transition fuel, ARDA and GLPGP are now promoting the Fund with key African Development Finance Institutions for the execution of LPG and bioLPG projects, the latter having the benefit of attracting carbon credits to aid financing.
Most African countries are currently indebted, as the cost of borrowing is rising. Do you think the continent needs to borrow more to transit towards net-zero?
Africa needs to develop its own unique, sustainable Energy Transition Plan that balances the continent’s energy security needs with the broader global net-zero ambitions. For example, Nigeria has pledged to achieve Net Zero by 2060 and has laid out Nationally Determined Contributions (NDCs) to accomplish this target.
While laudable, key projects targeted at carbon adaptation and mitigation must be financed in order for Nigeria and other African countries to achieve their net-zero ambitions. On behalf of ARDA, I personally participated on several panel sessions with major global stakeholders at COP 27 in Egypt last year that focused on Enablers of a Net-Zero Emissions Future in the Global South (with PETRONAS, Baker Hughes, Commonwealth Secretariat, etc.) and Adaptation, Resilience and Just Transition (with US Chamber of Commerce, IPIECA, General Electric, etc.) that focused on a just transition and adaptation finance to achieve these net-zero ambitions. These sessions and others at COP 27 clearly laid out the challenges for a just transition and proffered financing solutions for Africa whereby the Global North (major industrialized nations in North America, Europe, etc. that are mainly responsible for cumulative global CO2 emissions) provides the Global South (countries in Africa, Asia, Latin America, etc. that the least contributors of CO2 emissions) with majority of their funding requirements to achieve their NDCs and net-zero emissions targets at concessional rates.
For example, at COP 26 in 2021, South Africa executed a US$8.5 billion Just Energy Transition Partnership with France, Germany, United Kingdom, United States and the European Union to support South Africa’s decarbonisation efforts. This Partnership aimed to accelerate the decarbonization of the South African economy, with a focus on its electricity system, to help the country achieve the ambitious goals set out in its NDC emissions goals. South Africa, in turn, shared the details of its decarbonization plans at COP 27 in 2022 in line with the Partnership’s funding obligations.
Nigeria and African countries can use the South Africa model described above to secure the funding required to execute their respective NDCs to achieve their net-zero ambitions. COP 28 holds in Dubai, UAE at the end of this year and ARDA plans to engage with the COP 28 organizers to showcase opportunities for decarbonization of refineries and other downstream assets with a view to securing critical funding for its Members for execution of critical projects in line with the African Downstream Energy Transition Roadmap.
But whether these projects are financed externally as part of a just transition, or funded by African states through debt, the key is that the project is bankable – well documented, with strong compliance to global business standards, including on accreditation of carbon credits, with full appraisal of risk, reward and returns. Defining what makes a successful project in this challenging financing environment, and helping our Members achieve this, will be an increasing focus of ARDA’s activities in the future.
A new government is expected to take over in Nigeria by Monday 29 May; what will be your advice on how to address downstream challenges and move the oil and gas sector forward?
As mentioned earlier, ARDA is a non-governmental organization, but our Association is proud to have many Nigerian Members, including NNPC Limited, Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Sahara Group and Rainoil Limited that currently serve on the ARDA Executive Committee. As such, ARDA is fully committed to supporting the Nigerian Downstream sector, especially given that the country is the largest importer of petroleum products in Africa.
For example, ARDA and the Nigerian Petroleum Downstream Industry (including MOMAN, DAPPMAN and IPMAN) recently jointly hosted a virtual Workshop focused on “Deregulation of the Nigerian Downstream Sector – The Day After” that covered HSEQ best practices, national logistics optimization, corporate governance, regulations and enforcement, product specifications, impact of local refining and the future of gas as a transition fuel amongst other key industry issues. During the workshop, ARDA shared its perspectives on the need for harmonization of cleaner (AFRI-6 – 10 ppm sulphur) fuel specifications across Africa and access to transition funding to support the African Downstream Energy Transition Roadmap.
In addition, Nigeria can leverage the energy transition to build robust new business models. First, existing Downstream assets need to be decarbonized to future-proof their operations and extend their license to operate. The carbon footprints of the refineries and other downstream assets need to be reduced significantly, carbon emissions from refineries can be captured and used for other applications and more energy efficient energy sources can be used for operations. Carbon abatement projects, like the SIR project mentioned earlier, can also be executed to generate carbon credits.
Second, Nigeria must continue to invest in value-added petrochemicals projects as well as lower-carbon energy infrastructure projects like gas pipelines and LPG infrastructure that will help develop the country’s regional trade within the West African sub-region as well as boost product exports. Third, Nigeria can invest in renewable energy solutions, especially solar energy to decarbonize downstream assets’ operations, and push for production of green hydrogen from its refinery and other assets.
In respect of the removal or reduction of gasoline subsidies, this is evidently a political decision for the new administration. ARDA’s policy for over two decades has been to promote an efficient and economic regional petroleum product supply chain – and such a policy requires regional harmonisation of subsidies, taxes and duties on fuels to avoid illegal cross-border activities.
Considering the rising population on the continent; what’s your take on energy security in Africa?
Given that one-in-two people born globally over the next two decades will be African and the continent’s energy demand is projected to grow by 45% over the same period, Africa must have a coordinated policy for increasing energy access and reducing energy poverty. In addition, Africa is projected to have thirty (30) cities that will have populations over 5 million by 2035 which will result in increased pollution associated with higher energy demand so the continent must execute a sustainable plan to meet the projected growth in petroleum products requirements with cleaner fuels to prevent a major public health issue.
As a result, the 2023 ARDA Week that was held in March in Cape Town, South Africa focused on the theme: “Balancing Energy Transition and Energy Security for the African Downstream” and covered the latest developments in energy security, necessary infrastructure investments and decarbonization of the African downstream sector separately from the challenges facing the power generation and transmission industries. Key focus areas included discussions on how African governments and key stakeholders must retool their policies and regulations to prioritize decarbonization and cleaner transport and cooking fuels while ensuring that the growing near-term and longer-term energy demands of the continent are met in a sustainable manner.
There’s an existing collaboration between ARDA and AU to ensure cleaner fuel on the African continent. What’s the update on this project?
Across Africa, there are 11 different permissible grades of gasoil/diesel ranging from 10 ppm to 10,000 ppm sulphur and 12 different permissible grades of gasoline ranging from 10 ppm to 2,500 ppm sulphur. This situation has adversely impacted regional trade and implementation of pan-African regulatory frameworks to promote investments.
To address this, ARDA and the African Union Commission (AUC) have been collaborating since 2019 on the adoption of harmonized, pan-African standards for cleaner fuel specifications (AFRI-6 or 10 ppm sulphur) by 2030 to promote clear health and socio-economic benefits. Since 2019, ARDA and the AUC have held several stakeholder meetings, including several virtual forums in 2020 during the COVID-19 pandemic to review the proposed AFRI Clean Fuels Roadmap in line with the AUC processes.
Following the virtual forums, the Clean Fuels Roadmap and key findings from the various engagements were presented to AUC Specialized Technical Committee for endorsement in 2021. Presently, we are awaiting the final review and approval of the Clean Fuels Roadmap by the AUC Permanent Representative Council. We are very optimistic that the process will be concluded this year.
OPEC, ARDA and APPO are working closely on the energy outlook in Africa. What do you plan to achieve through this collaboration?
The OPEC-Africa Energy Dialogue, a collaboration amongst OPEC, the African Union Commission’s Department of Infrastructure and Energy, the African Petroleum Producers Organization and ARDA was initiated by the late Secretary General of OPEC, H.E. Mohammad Sanusi Barkindo, to promote open and transparent discussions on key energy-related topics relevant to Africa and its energy industries.
The OPEC-Africa Energy Dialogue has held two highly successful High-Level Meetings, first in June 2021 and again in February 2023 that have focused on key discussions on topics that included energy investment and finance in Africa, the just energy transition, energy poverty and the way forward for the OPEC-Africa Dialogue.
ARDA’s objective is to continue to collaborate positively with the other members of the OPEC-Africa Energy Dialogue towards the development of a robust, pan-African oil & gas industry that focuses on balancing maximizing the significant potential of the continent’s oil & gas sector to meet Africa’s growing energy demands as our industry progresses towards a lower-carbon future.