The oil market is oversupplied, prices are low and producers are fighting to undercut one another to hang onto market share.
Leading industry figures have gathered in Geneva for the annual Argus European Crude conference. The event has become a key part of Geneva’s equivalent of London’s International Petroleum Week.
Margins for gasoline against crude have hit 10-year highs in recent weeks, yet official prices for gasoline-rich Nigerian exports loading in July are at their lowest compared with the North Sea Dated benchmark over the same period.
When drivers have to queue for hours to fill their cars amid a crippling fuel shortage in Africa’s largest oil producing nation, it is clear that something has gone wrong.
May’s fuel crisis in Nigeria, whose repercussions are still being felt, had much to do with unpaid subsidies and a system riddled with inefficiencies and graft, but also with regulatory issues replicated in other African countries where pricing is linked to outdated models. Markets change and evolve, but many of the fuel price formulas used in Africa are relics from earlier times, based on benchmarks that lack liquidity, transparency or relevance.
“How can we expect others to invest in Africa if we don’t do it ourselves?” Thus asks Africa’s richest man, Aliko Dangote, via his executive director Mansur Ahmed.
Speaking to the African Refiners Association’s annual gathering in Cape Town, Ahmed said that the Dangote Group’s ambitious 500,000 b/d refinery project was about to break ground in Lagos, Africa’s most populous city, to be completed in the third quarter of 2017. Dangote is confident that, if they build it, investment will come. “When the refinery is operating profitably and well, we may float it in the stock market. But, initially, equity gives you the strongest opportunity to establish early profitability,” Ahmed says.