African Refiners Alert on Impending Impact of Funding Withdrawal for Oil Projects

Oil and gas operators under the African Refiners and Distributors Association (ARDA), have said that unless a far-reaching decision on the future funding of major projects in Africa is arrived at soonest, the industry may face serious challenges.

The group stated that the impact of Environmental, Social and Governance (ESG) issues on financing for oil and gas projects has become disruptive, insisting that unless borrowers like Nigeria and other African oil producers quickly adapt, securing necessary funding for the sector may remain very difficult. 

Executive Secretary of ARDA, Anibor Kragha, speaking on: “Implications of ESG Standards on Global Oil & Gas Project Financing”, at the ARDA Work Group Workshop Series on HSE & Quality, which held virtually, said attracting funding may become tougher without consideration for emissions reduction, social development and governance.

According to Kragha, with the oil and gas sector in a state of transition, forcing closure of traditional sources of capital, especially from the World Bank and other national and international development finance institutions (DFIs), alternatives will have to be found.

He noted that the impact of the transition will mean that projects seeking funding must account for enhanced health, safety and environment standards with due diligence and reporting requirements.

In addition, the expert noted that investors must now demonstrate how their HSE and Corporate Social Responsibility (CSR) practices contribute to return on investment and business performance.

He urged professionals, especially in the HSE segment to assist the sector in complying with global ESG best practices, particularly in the area of environmental issues. 

He said: “Covid-19 and the war in Ukraine have more than ever highlighted the need for refining of petroleum products in Africa. We can’t expand our capacity without finance. For us to get sustainable finance we must prioritize HSE.”

Kragha insisted that operational excellence remained critical to success in downstream oil industry, leading to productivity, risk and cost.

Also speaking at the event, Executive Chairman of Energy & Natural Resource Security, Inc. (ENRS), Derek Campbell, said Nigeria and other countries have more to worry about on the security of energy infrastructure. 

In his remarks on: “Energy Security: The Protection of Critical Energy Infrastructure and Natural Resource Assets,” Campbell decried persistent vandalism of infrastructure in the Niger Delta.

He stated that cases of security attacks, including drone attacks on oil facilities in Saudi Arabia, the METCALF Power Station sniper attack as well as the ransomware attack on Sonangol in 2019 cost the sector huge loses, noting that there was lack of “domain awareness” in the sector.

According to him, the energy must now prioritise physical and cyber risk mitigation solutions for critical energy infrastructure and natural resource assets.

Campbell pointed out that Energy Security Risk & Resiliency Assessments (ESRRAs) should emerge as a practice that countries must now prioritise to avert growing dangers to critical energy infrastructure. 

Also speaking, Offering Manager for Honeywell UOP’s thermal oxidizers business, Janet Ruettiger, stated that new technology will help the refining sector achieve emission specifications more efficiently and more economically with less environmental impact.

 Ruettiger said organisations could rethink the way waste management is approached across refineries, stressing that it enables waste management to be integrated with the design of the process units.

With refining, storage and supply deficits, experts say over $15.7 billion is needed to upgrade the existing refineries on the African continent alone to produce cleaner, AFRI-6 fuels fuels.

 In addition, over $160 billion projects are said to be currently under funding threat in Nigeria’s upstream oil sector amid a recent disclosure by the Organisation of Petroleum Exporting Countries (OPEC) that oil nations might find it difficult to raise over $12.6 trillion needed for oil and gas investment before 2045.