FLUCTUATIONS in crude oil prices on the international market is the biggest problem African refinery companies are facing, says Societe Ivoirienne de Raffinage head of trading Kouassi Koffi.
Speaking to Zambian journalists in Abidjan, Cote d’Ivoire yesterday, Koffi said most African refinery companies were capable of performing better if crude oil prices on the international market were stable.
Societe Ivoirienne de Raffinage (SIR) is a refinery company owned by the government of Cote d’Ivoire with the contribution of international petroleum companies.
The refinery started operating in 1965 with an initial capacity of 700, 000 metric tonnes per year but currently at 3, 800, 000 metric tonnes per year.
Sahara Energy Resources Limited which is one of SIR shareholders with 6.98 per cent shares has been listed as one of the five companies that have been shortlisted for the next stage of selecting a strategic partner in Zambia’s Indeni Petroleum Refinery Company Limited.
“Nobody can tell whether in future the prices of crude oil on the international market will change because it depends on so many political and economic situations of the world. In the refining sector, what we are looking at is the refining margin…even if the crude is at US $140, but if your refining margin is quite good, you process. Sometimes you can have crude at US $ 20 per barrel but with zero margins you cannot get anything. What impacts most is the refining margins. The problems we are facing as African refiners are that we do not determine prices. We buy and we sale. When you are selling and the prices have changed, you don’t get anything. So, this is our main problem at the moment,” Koffi said.
“This is a tricky situation we are facing as African refinery companies. It is not the case with big companies that belong to Total, Share…not for African refinery companies. If we are losing US $1 every month, this is manageable but when you lose US $3 to 4 per barrel, it is very difficult for the company. For us (SIR) what keeps us afloat is that we have support from the state. When you have a refinery, first of all, you should have a market. We are processing about three million metric tonne of crude per year and fortunately, our local market is now at two million.”
He said the fluctuations in crude oil prices on the international market were devastating.
“In 2014, the crude jumped to US $140 per barrel and months after, the same price got down to US $30 to $40. So at that moment, you have some stocks of crude and so mechanically we lose money because we feel, we buy the crude at US $140 and we sale it after processing when the barrel is US $60…we may lose roughly about US $80 per barrel. So, most of the refiners suffer from this situation not only SIR. So, we have a very bad financial status at that time because we lost a lot of money. Even though we are not the only ones…some of the refineries had to shut down because of this,” Koffi said.
“That is why we are trying to restructure to sort out the debt that we have. In the past, the crude market was not moving so fast. The issue now is that the fluctuations are very sharp and even up and down. In one day, you can have a fluctuation of US $3 to 4. In the past when I was just starting work in 1990, per year the crude could only gain US $1 per barrel. But nowadays, you can get from US $20 to 100 within a week or month. Things have changed completely. The market in the past was so soft but now it is moving so fast. In a day you can lose US $3 per barrel. Things have completely changed.”
And in his presentation, Koffi said SIR’s vocation was to produce petroleum products for domestic market and exportation, to ensure the supply security of Cote d’Ivoire, to be an international company, competitive, performer, making money and to be the filling station of West Africa.