Africa plans many oil refineries, only one likely

By Margaret Orgill - Analysis

LONDON (Reuters) - A new refinery in South Africa is likely to be the only one to go ahead in the short-term from a slew of projects proposed in sub-Saharan Africa, analysts say.

Dozens of developments have been announced in recent years in countries including Angola, Nigeria and Zimbabwe but most will stay on the drawing board due to rising costs, political instability and difficulty obtaining finance.

"There's a lot of talk of refineries going ahead, but until you hear of actual investment you have to be cautious," said Tom Pearmain, an analyst at Global Insight.

Africa, an increasingly important oil exporter, is a major importer of refined products due to growing demand for fuel and a lack of refining capacity.

In Nigeria, the world's eight-biggest crude oil exporter, the government of former President Olusegun Obasanjo, issued 18 licenses to private investors in 2003 to build refineries but many have since been revoked as they have not been built.

Investors agreed to build the refineries in return for oil licenses but refining is loss-making in Nigeria due to price controls on fuels, so most projects were abandoned.

Only a tiny 6,000 barrels per day (bpd) refinery in the southern Akwa Iboe state is under construction in the West African country, where the authorities have tried unsuccessfully to privatize its four ailing refineries.

SOUTH AFRICA MOVES AHEAD

The one major project that looks set to move forward is South African national oil company PetroSA's plan, announced last year, to build a $5.85 billion refinery at the deep-water port of Coega, near Port Elizabeth on the south coast.

The plant, which would have a capacity of 250,000 bpd, would raise South Africa's refining capacity by more than 30 percent.

The company has hired U.S. engineers KBR to carry out a prefeasibility study for the plant.

An investment decision will be made in 2010 and the refinery is due to come on stream in 2014 or 2015.

"Coega is probably the most viable. It's the seriousness of the project -- they are talking about linking up with other parties and KBR is involved at this stage," Pearmain said.

The Coega refinery will provide fuel to meet South Africa's booming energy demand and could also export to neighboring countries, Jorn Falbe, Petro's vice president of new ventures, told Reuters.

"There are a lot of (export) opportunities due to unreliable supply," Falbe said.