By Ian Simm @drake.newsbase.com
As Cameroon heads towards elections, in July, the country faces pressure to maintain social spending – particularly by keeping fuel prices affordable. It is becoming an increasingly expensive business, though, and local refinery expansion plans are unlikely to bring near-term relief.
As Cameroon heads towards elections, in July, the country faces pressure to maintain social spending – particularly by keeping fuel prices affordable. It is becoming an increasingly expensive business, though, and local refinery expansion plans are unlikely to bring near-term relief.
In July 2012 Cameroon raised its fuel subsidy spend for the year to
400 billion CFA francs (US$742 million). This represented an increase of
almost 24% on 2011, when it spent 323 billion francs (US$600 million).
At the time, Reuters quoted Gilbert Didier Edoa, head of the finance ministry’s budget department, as saying: “The decision to raise fuel subsidies was taken in order to stabilise prices at petrol pumping stations in the interest of the ordinary Cameroonian”.
The country introduced fuel subsidies in 2008, in the wake of violent protests about price hikes that led to the deaths of around 100 people – making the continuation of subsidies particularly important during the electoral season.
Edoa was quoted as saying: “the need to increase the subsidy was unfortunate and would deprive the government of budget resources for major infrastructure projects, including road construction”.
In March, petrol and diesel in Cameroon were priced at US$1.15 and US$1.04 per litre respectively. According to a note from Ecobank, pump prices have been static since 2009.
The Togo-based bank said the “subsidy component is as high as 50% on kerosene, which is the major heating fuel for low-income households in the country.” The bank also noted the country was forced to provide greater subsidies for areas further inland, which would otherwise be penalised by transport costs.
Out on a Limbé
Cameroon only has one refinery, Sonara’s 45,000 barrel per day Limbé unit, located around 350 km southwest of the capital, Yaounde. In mid-2011, the then general manager of Sonara, Charles Metouck, announced that the facility would receive 75 billion francs (US$164 million) from eight banks to fund its expansion. The project is expected to raise the unit’s capacity to around 80,000 bpd.
Metouck was dismissed in February of this year and broke into his former office, apparently in order to destroy documents implicating him. As a result, he was arrested and, in April, sentenced to nearly 10 years in prison.
The refinery investment will also allow the unit to process heavy crude. The government owns a 66% stake in the refinery, with Total holding an 18% stake, while ExxonMobil and Royal Dutch Shell have 8% each.
Making the grade
Cameroon produces two grades of crude – Kolé, a light crude with 34º API, and Lokele, a heavier crude with an API gravity of 20º. However, the Sonara unit currently only refines light crude.
In the note, Ecobank’s head of research, Rolake Akinkugbe said: “Kolé crude grade represents less than 20% of the refinery’s feedstock but Sonara is undergoing an upgrade that could raise its utilisation of Kolé crude oil above 30%. Due to the high residual fuel production from Kolé, put at over 40%, the upgrade is billed to include the installation of a hydro-cracking unit, which would significantly boost the refinery’s output of petrol and jet fuel, for which the refinery is currently unable to satisfy market demand.”
At present, according to local sources, the facility relies on imported Bonny crude from Nigeria, Alba condensate from Equatorial Guinea and a mixture of light crudes from Angola to blend with Kolé, and thus satisfy domestic demand.
The Ecobank note added: “Plans to expand capacity at Sonara or build a new refinery are unlikely to immediately reduce fuel prices … However, the refinery would require more hydro-cracking capacity than planned to be able to process purely Kolé crude. The government has also considered building a new export-focused refinery that will process Cameroonian crudes, as well as other crude blends.”
The planned new unit in Kribi is expected to be built with a refining capacity of 200,000 bpd, which can be later ramped up to 350,000 bpd. It will also be able to cover cover supply cuts from Sonara during maintenance work at the latter.
However, already paying the price for the lack of complexity at the Limbé facility, Cameroon will continue to be at the mercy of the market, as “depend on crude oil bought at international market prices (Brent plus), it will have to cover its margins and thus offer no measurable reduction in fuel prices too for the foreseeable future,” according to Akinkugbe.
At the time, Reuters quoted Gilbert Didier Edoa, head of the finance ministry’s budget department, as saying: “The decision to raise fuel subsidies was taken in order to stabilise prices at petrol pumping stations in the interest of the ordinary Cameroonian”.
The country introduced fuel subsidies in 2008, in the wake of violent protests about price hikes that led to the deaths of around 100 people – making the continuation of subsidies particularly important during the electoral season.
Edoa was quoted as saying: “the need to increase the subsidy was unfortunate and would deprive the government of budget resources for major infrastructure projects, including road construction”.
In March, petrol and diesel in Cameroon were priced at US$1.15 and US$1.04 per litre respectively. According to a note from Ecobank, pump prices have been static since 2009.
The Togo-based bank said the “subsidy component is as high as 50% on kerosene, which is the major heating fuel for low-income households in the country.” The bank also noted the country was forced to provide greater subsidies for areas further inland, which would otherwise be penalised by transport costs.
Out on a Limbé
Cameroon only has one refinery, Sonara’s 45,000 barrel per day Limbé unit, located around 350 km southwest of the capital, Yaounde. In mid-2011, the then general manager of Sonara, Charles Metouck, announced that the facility would receive 75 billion francs (US$164 million) from eight banks to fund its expansion. The project is expected to raise the unit’s capacity to around 80,000 bpd.
Metouck was dismissed in February of this year and broke into his former office, apparently in order to destroy documents implicating him. As a result, he was arrested and, in April, sentenced to nearly 10 years in prison.
The refinery investment will also allow the unit to process heavy crude. The government owns a 66% stake in the refinery, with Total holding an 18% stake, while ExxonMobil and Royal Dutch Shell have 8% each.
Making the grade
Cameroon produces two grades of crude – Kolé, a light crude with 34º API, and Lokele, a heavier crude with an API gravity of 20º. However, the Sonara unit currently only refines light crude.
In the note, Ecobank’s head of research, Rolake Akinkugbe said: “Kolé crude grade represents less than 20% of the refinery’s feedstock but Sonara is undergoing an upgrade that could raise its utilisation of Kolé crude oil above 30%. Due to the high residual fuel production from Kolé, put at over 40%, the upgrade is billed to include the installation of a hydro-cracking unit, which would significantly boost the refinery’s output of petrol and jet fuel, for which the refinery is currently unable to satisfy market demand.”
At present, according to local sources, the facility relies on imported Bonny crude from Nigeria, Alba condensate from Equatorial Guinea and a mixture of light crudes from Angola to blend with Kolé, and thus satisfy domestic demand.
The Ecobank note added: “Plans to expand capacity at Sonara or build a new refinery are unlikely to immediately reduce fuel prices … However, the refinery would require more hydro-cracking capacity than planned to be able to process purely Kolé crude. The government has also considered building a new export-focused refinery that will process Cameroonian crudes, as well as other crude blends.”
The planned new unit in Kribi is expected to be built with a refining capacity of 200,000 bpd, which can be later ramped up to 350,000 bpd. It will also be able to cover cover supply cuts from Sonara during maintenance work at the latter.
However, already paying the price for the lack of complexity at the Limbé facility, Cameroon will continue to be at the mercy of the market, as “depend on crude oil bought at international market prices (Brent plus), it will have to cover its margins and thus offer no measurable reduction in fuel prices too for the foreseeable future,” according to Akinkugbe.
Hello Everybody,
ReplyDeleteMy name is Mrs Sharon Sim. I live in singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of $250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of $250,000.00 U.S. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com)Thank you