Senegal to keep refinery running after strategic review

Mon Feb 3, 2014 11:56am EST

* African plants face tough competition from abroad

* SAR wins $350 mln credit line from Nigeria's UBA

* I. Coast and Senegal compete to supply West Africa

By Diadie Ba and Emma Farge

DAKAR, Feb 3 (Reuters) - Senegal will keep its one, ageing oil refinery in operation after the government completed a strategic review to determine its future, industry sources familiar with the matter said.

The study commissioned by the government considered closing the 25,000 barrel per day SAR plant and converting it into an import and storage terminal.

SAR, owned by state oil company Petrosen (46 percent), Total (20 percent) and the Saudi Binladin Group (34 percent), has secured a loan of $350 million to finance 2014 crude imports, Phillips Oduoza, the chief executive of Nigerian bank United Bank for Africa (UBA), told Reuters.

An official at SAR declined to respond to Reuters' requests for comment.

While demand for fuel in Africa is booming, refiners such as SAR have been struggling to compete as shipments from foreign refiners and traders have been flooding the $80 billion market.

The Senegal plant, more than 50 years old, is expensive to run because there is no local source of crude oil, and most is imported from Nigeria.

Even with the Senegal plant open, its capacity is sufficient at best to supply less than half of Senegal's market of 1.8 million tonnes a year.

Meanwhile, its debt after rescheduling amounted to 31 billion CFA francs ($63.7 million) at the end of 2012, a SAR document showed.

The plant will close for major maintenance work in April, sources said, temporarily boosting imports further.

But it will need to spend more for Senegal to avoid losing ground to Ivory Coast as a regional supply hub, an industry source said, adding that SAR needed to invest to expand storage and pipelines to improve supplies to neighbouring, landlocked countries.

"Senegal has effectively already lost the competition to the Ivory Coast to become the main logistical hub for the sub-region. They've just been too slow," he said.

Ivory Coast's SIR refinery is almost three times the size of the SAR facility and has ramped up output over the past two years after operating well below capacity during a decade of political turmoil that ended in 2011.

The country has also already built a fuel pipeline from coastal Abidjan to inland Yamoussoukro and plans to extend it to Burkina Faso, which currently gets fuel by truck from Senegal.

Puma Energy, part owned by commodities trader Trafigura, and Vivo Energy have invested in Senegal's fuel sector. ($1 = 486.4160 CFA francs) (With additional reporting by Tim Cocks in Lagos; editing by Jane Baird)

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