Inside Africa: Refining The Republic Of The Congo’s Oil Industry
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After a profound economic crisis that plagued the Republic of the Congo’s oil industry from mid-2014 following a decline in oil prices, the Congolese economy soon resumed an upward trajectory in 2018 with real GDP growth projected to reach 1.6% after two years of negative growth. This growth was driven by the drastic increase in oil production and favorable market conditions, with oil prices holding steady in recent years and the resumption of demand from partner emerging countries.
Fuel shortages, though, have rocked the Republic of the Congo state (Congo-Brazzaville) in recent years, much of which resulting from logistical issues with the transportation of petroleum products between the two major Congolese cities of Pointe-Noire and Brazzaville. The Congolese economy desperately relies on crude oil, as the state acts as a prime example for the resource curse, also known as the paradox of plenty. States that fall under this category often house an abundance of natural resources yet tend to lack economic growth and stability.
Many of these complications stem from the state’s past of colonization as well as the current issues the state faces such as conflict within and near its borders, exploitation perpetrated by neighboring countries and rebel groups, international influence, and the corruption that exists within its own government. According to the World Bank, the country ranks among the top 10 of Africa’s oil producers and possesses a substantial amount of mineral resources, the majority of which are yet untapped.
Since the end of colonial rule by the French in 1960, the Congolese oil sector has continued to be dominated by foreign companies. The French parastatal oil company, Total, accounts for 70% of the country’s annual oil production. Italian and American oil companies also have hands in the market, pulling revenue away from the Congolese’s economy.
The country’s first refinery, the Congolaise de raffinage (Coraf), has been in operation since 1982. The refinery has the capacity to process 1 million tons of oil per year, but officially only processes 600,000 tons annually. The country’s needs are estimated at 1.2 million tons. While Congo-Brazzaville is currently the fourth-largest oil producer in sub-Saharan Africa, it only has one refinery that meets a small percentage of regional demand for petroleum by-products. Neighboring states such as Gabon, the Democratic Republic of the Congo, Cameroon, and Angola are major net importers of refined oil products, creating a substantial market to meet both domestic and regional fuel needs. Expanding upon the economic gains of the state’s largest export has the ability to bring some level of stability to state-wide economic concerns.
Faced with these chronic fuel shortages, Congo-Brazzaville is seeking a solution to refine more oil at home. This in turn would allow for Congolese companies to take back the oil market from foreign hands. President Dennis Sassou Nguesso recently announced the launch of the construction of a new, bigger refinery near the port city and oil industry hub of Pointe-Noire.
This project, estimated to cost nearly $600-million, acts as a pivotal moment for the nation’s hydrocarbon sector, which seeks to increase domestic refining capacity and offset chronic fuel shortages. The project follows an investment agreement concluded in 2020 between the Congolese government and the Beijing Fortune Dingheng Investment Co Ltd. With no additional refining capacity available in the region, Congo-Brazzaville is redirecting its focus on regional energy growth through the development of the Pointe-Noire facility.
Named the Atlantic Petrochemical Refinery, the new unit is aimed at diversifying and consolidating the industrial fabric of the country which depends essentially on crude oil, its first source of export. Additionally, the new facility is expected to create more than 10,000 jobs during its construction phase, increasing local living standards, skill sets, and infrastructure while facilitating economic growth.
“The refinery will produce automotive and aviation gasoline, liquified petroleum gas, diesel, lubricants, bitumen, kerosene, and other products,” Hydrocarbons Minister Jean-Marc Thystère Tchicaya stated during a ceremony presided over by Congolese Head of State Denis Sassou Nguesso. “The new refinery is, therefore, an important link in the diversification of the economy in the hydrocarbons sector.”
The refinery is set to be constructed in two phases. Phase 1 incorporates the engineering and procurement state, as well as the construction, commissioning, and start-up of core refining units, which carry a minimum capacity of 65,000 barrels of oil per day. This phase places an emphasis on fulfilling the domestic demand. Commencing in 2022, Phase 2 will incorporate additional units for full conversion ability, allowing the refinery to maximize unit capacity and operate at 110,000 barrels per day. This additional production will allow for regional export; the refinery will then be designed to run heavy to medium-grade crudes.
The Congo’s growing petroleum sector is by far the state’s major revenue source, acting as a promising stimulant of economic growth. The state produces 204,735.33 barrels of oil per day (based on 2016 numbers), ranking 37th in the world in terms of oil production. The value of the Atlantic Petrochemical Refinery lies in its regional competitiveness. Taking advantage of the state’s location — a high growth region with substantial underserved resource demands — the Pointe-Noire project aims to maximize the value of Congolese crudes, eliminate oil production supply risks and reduce the outflow of foreign currency. With government backing, coupled with the support of legislation that demonstrates a commitment to the construction timeline, the new refinery is expected to transform the national economy and grant the Republic of the Congo regional exporter status.