As Africa’s demand for petrol, diesel and fuel expands while that of developing economies falls, the continent will become the focus for global fuel exporters competing to supply it, say experts. The demand cannot be filled by Aliko Dangote‘s refinery alone.

Dangote’s refinery in Nigeria – valued at $20bn with a 650,000 barrels per day (bpd) capacity – began producing diesel and aviation fuel in January, and petrol in September. It has already exported refined products to several countries.

“Definitely, [the Lagos refinery] makes a dent in sub-Saharan Africa’s import requirement,” Daniel Evans, vice president and global head of fuels and refining at S&P Global Commodity Insights, tells The Africa Report.

Demand for fuel will continue to grow on the continent, home to the fastest-growing population and projected by the UN to host 2.5 billion people in 2050, he says.  “Sub-Saharan Africa is the one region in the world where we see long-term demand for oil. Surging import requirements will make Africa a battleground for exporters. Major fuel exporters will compete to supply Africa,” he says.

Africa’s reliance on fuel imports

The world’s second-largest continent after Asia has been heavily dependent on fuel imports for decades, owing to low refining capacity despite having several major oil producers, particularly Nigeria and Angola.

Between now and 2030, we think more than a million barrels a day of European refining capacity will close

Dangote, founder and president of Dangote Industries, decried the dearth of refineries on the continent in May at the Africa CEO Forum in Kigali. “In the entire continent, there are only two countries that don’t import petroleum products – Algeria and Libya – which is a tragedy. The rest are all importers,” he says, adding that his refinery has the capacity to supply enough petrol to “at least the entire West Africa”, diesel to West Africa and Central Africa, as well as aviation fuel to the entire continent, Brazil and Mexico.

Africa imports between 2.5 million and 3 million bpd of petroleum products yearly from Europe, Russia and other parts of the world.

Energy consultant Wood Mackenzie said that globally, 121 out of 465 refining sites surveyed were at risk of shutting down. Energy majors including BP, Shell, ExxonMobil, TotalEnergies and Chevron have massively reduced their refining footprint, with stakes in just 50 refineries compared to more than 200 three decades ago, says Evans.

“We see that the flow of gasoline that is coming from Europe into West Africa has been significantly reduced as a result of having more production in the region,” he says. “I think the challenge for European refiners is that there is nowhere else they can really send it to, and so that puts pressure on them to reduce their production and ultimately it will lead to some closures.”

Some closures have already been announced. “We are expecting about 200,000bpd worth of closures this year and another 600,000bpd in 2025 including some in the US. Between now and 2030, we think more than a million barrels a day of European refining capacity will close,” he added.

New supply threatens ‘platinum age of refining’

Evans said refiners witnessed a period of unusually high margins that started in 2022, which S&P termed ‘the platinum age of refining’, but new supply including from Mexico’s 340,000bpd Olmeca refinery ended it.

The era of exceptional profitability came after import bans on Russian refined products were put in place following Russia’s invasion of Ukraine in February 2022, the shutdown of refinery capacity during the Covid-19 period and the delay of planned refinery expansions.

The US Gulf Coast refiners are focused on Africa as a market that they can potentially target as demand falls in North America

Supply growth is expected to outstrip demand in the second half of this decade, says Evans.

“The European refining system is going to compete with new refineries like Dangote as well as new refineries in the Middle East and bigger, more complex refineries in the US,” he says. “We will end up with a situation where we have too much capacity and it just happens that the European ones are the least competitive.”

He said because the European refineries “are older, smaller and less complex with a higher cost structure”, it would be more difficult for them to place their barrels profitably in the market compared to other players.

“If you look at East Africa, I think that is a market that Indian and Middle East refiners will be targeting. For West Africa, obviously, Dangote is going to play a big role in supplying the region, but then I think the US Gulf Coast refiners are focused on Africa as a market that they can potentially target as demand falls in North America,” Evans says.

Dangote said this month at a refiners’ summit in Lagos that its refined products had been exported to diverse markets, including Europe, Brazil, the UK, the US, Singapore and South Korea. He said the ageing population and the adoption of electric vehicles were leading to slower demand growth, especially for petrol, in developed countries.

“Most of the demand growth is expected to come from developing regions like Africa,” he says. “As a result of these factors, margins are down, and refiners are getting squeezed. Only the most efficient refineries will be well placed to weather these headwinds.”