Gemcorp Holdings Ltd. has qualified for a $335 million loan for a refinery project in Angola that is expected to meet about 10 percent of local demand for petroleum products.
The financing fund led by Africa Finance Corp. (AFC) and African Export-Import Bank (Afreximbank) accounts for almost 71 percent of the $473 million cost for the Cabinda oil refinery, according to a joint press release by the parties on Thursday.
The financial closure comes three years after state oil company Sonangol EP canceled the initial contract awarded to Hong Kong-based United Shine, reportedly for failing to meet capital and technical requirements. Gemcorp is now the majority shareholder in the project with Sonangol as a partner, according to the media release.
“The line of credit covers the first phase of the project and paves the way for construction, which will process 30,000 barrels of crude oil per day,” the announcement says. The second phase doubles output to bring production capacity to 60,000 barrels per day.
“Upon completion of Phase 1, the refinery is expected to supply 10% of the country’s total demand for refined petroleum products, rising to ~20% upon completion of Phase 2, while creating over 1,300 direct jobs and indirect in the process”. , says the statement.
The project would also reduce the southern African country’s dependence on imports for its energy needs, he said.
While oil and gas have been among the main exports of Angola, a member of the Organization of the Petroleum Exporting Countries (OPEC), it depends on the import of refined products. It has been sending most of its crude abroad while importing more refined products than it produces, according to the latest data through 2019 from the African Energy Commission. Angola produced nearly 242,400 kilotons of oil that year, exporting about 122,500 kilotons. It imported more than 98,300 kilotons of petroleum products and exported around 73,400 kilotons of petroleum products in 2019, according to the data.
Angola’s oil product production averaged 40,000 barrels per day (bpd) in 2021 with a refining capacity of 80,000 barrels per calendar day, according to the latest OPEC data. It exported 29,000 bpd of oil products in 2021. Of the 1.124 million bpd of crude it produced that year, Angola exported 1.08 million. It also exported approximately 179.54 million cubic feet of natural gas.
“Crude refining and the distribution of its derivatives remain well below domestic demand,” the US International Trade Administration said in a country report on August 5, 2022. “Angola is a leading producer on the continent and has recently overtaken long-time leaders Nigeria. and Algeria, but is highly dependent on imported refined oil. The country spends more than $2 billion a year on oil imports.”
But the Cabinda refinery project “aims to make Angola energy independent while harnessing its natural resources for the benefit of the community and the wider economy,” Gemcorp CEO Atanas said.
Bostanjiev said in the funding announcement, calling the refinery “a monumental, life-changing infrastructure.”
AFC President and CEO Samaila Zubairu commented: “We are delighted to announce the successful financial close of this innovative refinery project.”
“This structural transformation project is in line with our vision to capture and retain value in the Angolan economy while reducing carbon emissions by eliminating two wasteful journeys involved in the export of crude oil as raw materials and the import of new as a refined product,” he added.
The refinery will maximize the value of Angolan oil “while contributing to the reduction of greenhouse gases by reducing the need to transport crude and refined products there from Africa,” said the president of Afreximbank and chairman of the board of directors, Benedict Oramah.
“We hope to boost intra-African trade by supplying refined products from Angola to nearby markets,” Oramah added.
Lenders also include the Arab Bank for Economic Development in Africa, the Angola Development Bank and the Industrial Development Corporation of South Africa.
Angola has 2.516 million barrels of proven oil reserves and about 10.63 trillion cubic feet of proven natural gas reserves, according to OPEC.
But the country has yet to unleash the potential of its oil and gas industry due to bureaucratic and financial hurdles. “The business environment in Angola’s oil and gas sector remains one of the most difficult to navigate even after policy changes have been introduced in the sector,” the US ITA report said . “Sector barriers and immense macroeconomic threats persist and make it difficult for even big-name multinationals and the smartest local company willing to enter the sector.”
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