China's Oil Companies African Refinery Investments

abarrelfullabarrelfull wrote on 11 May 2011 06:27
Tags: africa cnooc cnpc petrochina refinery sinopec

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In a recent article, Trying to pull together, the Economist took a look at Chinese investment and trade in Africa. The numbers are significant.

The Heritage Foundation, an American think-tank, estimates that in 2005-10 about 14% of China’s investment abroad found its way to sub-Saharan Africa

One of the interesting issues is how Chinese companies are willing to invest in sectors that nobody else is interested in. Refining is a good example. CNPC / Petrochina have two active refineries and two more under construction. There are also a number of projects on paper, that may or may not get realised. The strategy generally appears to be utilising a refinery investment to get access to upstream resources.

The two refineries in operation are Soralchin Refinery a 12.000 bbl/day plant in Algeria and Khartoum Refinery in Sudan.

One of the projects under construction is the N'Djamena Refinery Project in Chad, a 20,000 bbl/day plant expected to be completed in 2013. It is an investment designed to complement CNPC upstream investments in the same country. The other, the Zinder Refinery Project in Niger is also part of an integrated upstream-downstream investment.

Last year, Nigerian National Petroleum Corporation (NNPC) and China State Construction Engineering Corporation Limited (CSCEC) sealed a deal to build three refineries in Nigeria. Whether it ever gets past the drawing board, and to what extent Chinese companies will be investors only time will tell.

Sinopec does not yet have a downstream presence in Africa, but is said to be interested in the Coega Refinery Project in South Africa.

CNOOC is a relative new comer to refining, and has yet to invest in downstream abroad. However, a recent deal in Uganda, could bring such a move onto the table. The Ugandan government is keen to see a refinery built as part of the overall investment strategy.

So investment by China's oil companies in refineries in Africa is a story that may continue to grow and develop.

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