Downstream

Earlier this year, Sahara Tanzania announced the expansion of its petroleum products storage capacity in the country to 72 million liters. Nigerian energy and power conglomerate Sahara Group has been present in Tanzania since 2015, starting with 10 loading arms and four storage tanks with a combined storage capacity of 36m litres. It has now expanded such infrastructure to 20 loading arms and eight storage tanks. The infrastructure expansion is ine line with the company’s commitment to support products availability in East Africa. Sahara Tanzania is in fact currently involved in expanding storage capacity of automotive gas oil, premium motor spirit and Jet A1. The company has notably committed to build two liquefied petroleum gas (LPG) tanks with a capacity of 6,000 cbm. Sahara Group is one of the largest and most integrated African energy and infrastructure conglomerates with significant business interests across the upstream, midstream, downstream, power generation and logistics & trading industries across the continent and globally. The group started in 1996 as Sahara Energy Resource to trade petroleum products, entering Ghana in 2000, Côte d’Ivoire in 2001, Tanzania in 2015 and Zambia and Guinea-Conakry in 2017. Since 2017, it has consolidated all its petroleum trading, marketing, distribution and storage activities under a single entity, Asharami Synergy.

It took almost two decades, two historic crashes in commodity prices and two recessions for Nigeria to finally adopt its new Petroleum Industry Bill. Following its passing at both chambers of Parliament in July, the bill was officially signed into law by President Buhari today. The bill is expected to provide much-needed regulatory certainty for investors seeking to do business in Africa’s most populous nation. Nigeria has the world’s eight largest proven gas reserves and is Africa’s largest crude oil producer. However, years of under-investment have left production on a declining trend: in June of this year, Nigeria was producing only about 1.4m bopd and has not been producing over the 2m bopd threshold since 2012. A major factor to judge the efficiency and impact of the PIB will now be its ability to revive deep-water projects that have remained on the shelves for years. IOCs in Nigeria have discovered billions of barrels of oil equivalent offshore which have remained undeveloped because of market conditions and lack of a supportive regulatory framework. The passing of Nigeria’s Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Act in late 2019 had only further jeopardized the economics of most of these discoveries by removing the water depth-based royalty and replacing it with a flat 10% royalty on all deep-water PSC. It had also introduced a price-based royalty adding 0 to 10% depending on the oil price. Will the PIB be able to revive the investment appetite of IOCs for those deep-water projects? Time will tell but time is also of the essence. Only the development of these discoveries has the power to significantly increase Nigeria’s output. Another crucial aspect to take into consideration is the security situation in the Niger Delta. Insecurity and vandalism there are one of the main reasons for investors shying away from Nigeria and for the exit of IOCs out of their onshore and shallow water licenses in the country. It remains until today a major factor preventing Nigeria’s hydrocarbons sector to realize its investment potential. Because host communities will not be receiving the share they asked for (2.5-3% instead of 10%), an appeasement in the Niger Delta is not certain.  For the same reason, the PIB is not expected to slow down the pace of divestments by IOCs in the Niger Delta, although the same move will benefit indigenous players with cash at hand.

Djibouti has no natural resources, a land area of only 23,200 km2 and a population of 1m. Yet, the country has attracted billions of dollars of investments over the past decade, making some of Africa’s biggest economies look up to it with envy. Foreign investors from China, the Middle East and the United States are injecting billions into the country’s ports, oil & gas terminals, free trade zones and a 750km rail line that serves Ethiopia’s population of over 110m. That railway line alone can carry 2,600 tonnes of wheat and fertilisers and 110 containers per trip.  At a time when African countries continue to decry the lack of investment into the continent’s infrastructure, Djibouti is forging ahead and using its geographical location to build the trade and services infrastructure of tomorrow. Geography is the country’s biggest asset: Djibouti is located on the strait of Bab-el-Mandeb on the north-east edge of Africa, where 30% of the world’s shipping passes on its way to the Suez Canal. Coupled with political and economic stability, Djibouti offers investors a safe haven to tap into the world’s most dynamic globalization routes while serving Africa’s growing population. It also helps that its neighbours Eritrea and Somalia continue to be plagued with insecurity and instability. Djibouti’s ports and container terminals remain amongst the most productive in the world. According to a new global container port performance index compiled by the World Bank and IHS Markit, its port is even the most efficient in Africa measured by minutes per container move. With such efficiency, Djibouti’s goal of emulating Singapore as a leading maritime trading hub is within reach. To cement its position as the world’s future big trading hub, Djibouti recently set up a sovereign wealth fund with a view to finance about $1.5bn of domestic business activity over the next decade. In parallel, the country has embarked on significant infrastructure expansion with the Djibouti Damerjog Industrial Development Free Zone, echoing Singapore’s own Jurong petroleum and petrochemicals hub. The industrial park represents a 15-year undertaking and is expected to house integrated energy and petrochemicals facilities and further position the country as a strategic energy and industrial hub meeting the needs of the East African sub-region. While the complex was initially conceptualised to export South Sudanese oil, it eventually developed into a mega industrial and petrochemicals scheme. The ultimate oil complex will cover 80ha, starting with the development of 32ha comprising of 300 000 m3 storage tanks, an oil jetty and railway infrastructure connected to the Nagad Station, and from there to the Djibouti-Addis Abebe railway line. It will also include the construction of a 6 million tonnes refinery by the China Marine Bunker Co. Ltd (CHIMBUSCO) that will refine Saudi and Sudanese crude into marine fuels with a sulphur content of no more than 0.50%S, along with diesel, naphtha and LPG. The facility would primarily meet demand for Djibouti and Ethiopia and be followed by the construction of an onshore refinery. The industrial park will also benefit from a 150MW gas-to-power plant, starting with a 20MW hybrid power station expected to be commissioned in 2022. Such power supply will be key for all upcoming manufacturing units in the park built by Chinese investors and including steel, metal mesh, PVC pipes and glass. The anchor project for the whole complex is the Damerjog Liquid Bulk Port, Djibouti’s seventh port, built by Moroccon contractor SOMAGEC. President of Djibouti Ismaïl Omar Guelleh laid the foundation stone there in September 2020. Details on the Damerjog industrial park and liquid bulk terminal can be found in the “Projects” section within your Hawilti+ research terminal.