The executive chairman of New Alpha Refinery Ghana, which is planning to build a US$6bn refinery in Ghana's western port of Takoradi, has said that the company has concluded a 20,000 barrel per day (b/d) offtake agreement with Port Harcourt-basedRoss International Nigeria, according to a Reuters report on March 29. The deal could boost the economic feasibility of the ambitious project, which aims to build a 200,000b/d refinery to supply fuels to Ghana and Nigeria.
With few refineries and limited capacity, the Sub-Saharan African region is currently a net importer of refined products. In its report, Reuters cited downstream African consultancy CITAC as saying that the region currently imports 1.4mn b/d of refined products, excluding fuel oil. Although several refinery projects are planned in the region, a lack of investor confidence over governance has meant that overseas funding has not been forthcoming and several projects have stalled. An effective way to mitigate refining projects' risks and boost commercial feasibility (and therefore to attract international funding) is to secure customers for refined products at an early stage. This is the tactic that New Alpha Refinery has deployed.
When announcing the offtake deal in an interview with Reuters, New Alpha's Merlyn Julie added that the refinery was now looking at a further offtake agreement with the government of Nigeria's Rivers State and an unnamed US-based oil company for 20% of the total capacity, or 40,000b/d. Julie also said that state oil products marketer Ghana Oil (Goil) had expressed interest in receiving a minimum of 30% of the facility's output, or 60,000b/d. If these two potential deals also go ahead, the refinery will have secured customers for at least 60% of its capacity. This will make the project a much more appealing prospect for investors.
A Memorandum of Understanding (MoU) to construct the refinery, which would be Ghana's second after the 45,000b/d Tema facility, was signed with New Alpha in July 2009. The refinery is to be built in Takoradi, where the pipes from the offshore Jubilee oilfield come ashore. The facility could also source feedstock from Nigeria. According to Julie, New Alpha is currently negotiating a crude supply deal with the Nigerian government, with the possibility of offering refined products in exchange. Refined products from the refinery are aimed at the domestic market and at Nigeria, which is currently a net importer of oil products owing to problems including sabotage, fire, poor management and lack of regular maintenance at its own refineries.
A pre-feasibility study for the Takoradi refinery project is expected to be completed by the end of October 2010 and the refinery is scheduled to come onstream by 2015. While the agreement with Ross International will help to demonstrate the feasibility of the refinery, in order for the project to go ahead, New Alpha will need to secure additional offtake agreements. An alternative to this long process could be to find a larger partner to join the project. In the interview with Reuters, Julie claimed that New Alpha was looking at the possibility of involving a company from the Far East, particularly China, in the project. One company that could be interested in the project is China Petroleum & Chemical Corporation (Sinopec), which is seeking investment opportunities in both upstream and downstream projects in Africa.