Africa is a large continent composed of 55 countries. Some of the countries have important crude reserves like Nigeria, Libya and Algeria; others have many refineries like Egypt, Nigeria and South Africa, while the remaining countries have no oil reserves or refineries and are fully dependent on imports (see first figure below). However, for the African petroleum-exporting countries, many of them are importing fuels as their refineries are not upgraded and do not operate at 100% capacity. The continent is divided by oil producing countries with refineries, non-oil producing countries with refineries and non-oil producing countries without refineries that are fully dependent on imports. Generally, there is no country in Africa which is self-sufficient in fuels.
Out of the 55 African countries, 17 are landlocked countries, which are not able to implement regulations on fuel quality because of their heavy reliance on coastal countries. When it comes to fuel quality, the landlocked countries receive the same fuel quality as the coastal countries and cannot impose their own regulations. However, that also means that regulations set by the coastal countries have a significant impact on the landlocked countries.
The full report analyzes fuel quality developments which have occurred in Africa since the last Insight, Feb. 22, 2018. In addition to the spec changes that occurred since 2018, the full report also focuses on the ongoing changes and the observed harmonization of fuel sulfur reduction in some of the sub-regions of the continent (see second figure below), namely the:
- East African Community (EAC);
- Economic Community of West African States (ECOWAS); and
- Southern Africa Development Community (SADC).
2018 and 2019 saw the increased awareness of the necessity to reduce fuel sulfur levels in Africa, which will be transformed under the leadership of three of the largest sub-regional organizations of the continent including EAC, ECOWAS and SADC. In EAC, the penetration of 10 ppm is occurring in the market by way of imports through Kenya and will likely assist the voluntary implementation of 10 ppm for diesel in Kenya and Uganda by 2021, while new EAC standards for 10 ppm sulfur fuels are expected to be drafted by 2022. In addition, the latest plan in West Africa is to import 50 ppm sulfur fuels by January 2021 and ban local production of fuels with sulfur higher than 50 ppm by January 2025. Furthermore, SADC member countries agreed to reduce sulfur levels in fuels to 50 ppm or less by the end of 2022 for importing countries and by 2025 for countries with refineries and eventually to 10 ppm between 2025 and 2030 for all countries.
However, the major issue in the continent continues to lie on upgrading of the local refineries. Stratas Advisors expects that only the refineries in Cote d’Ivoire and Niger will be able to meet the ECOWAS agreement by 2025, as the majority of refineries will not be upgraded by that time. Finally, SADC’s plans for harmonization heavily depends on South Africa’s capability to implement its Clean Fuels 2 Program (CF2) by 2025.
Moreover, for now, the move of sulfur reduction in Africa would not be followed by the implementation of stricter vehicle emission standards in many countries. Old vehicles will continue to be imported from Europe and Asia, as border control is not efficient in the majority of the countries in Africa.