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Pricing and Investment Policy Issues the DownStream Petroleum Sector in Africa

By

Stephen Karekezi, Timothy Ranja & John Kimani


Abstract

Petroleum consumption in Africa is ranked among the lowest in the world. In 1992, the demand for oil and gas in Africa was 97.6 and 34 MTOE respectively. In 1995, oil consumption increased to 102.7 million tonnes. Consumption grows by 2.6% between 1994 and 1995. In comparison, South and Central America grew by 3.9%. China and India registered 5.3 and 7.6%, respectively, within the same duration. Projections indicate that by the year 2010, the continent’s oil requirement will be 75% higher than the 2 million barrels per day figure in 1991. 

While the total final consumption of oil products in 1992 for Ethiopia and Zambia, was 905 and 463 thousand tones respectively, the corresponding figures for Argentina and Philippines and as 20,628 and 12,698 thousand tonnes respectively. African countries also register diversity in their consumption. South Africa and North Africa countries register higher consumption than the rest of sub-Saharan Africa countries. In 1992, South Africa and Morocco consumed 16,275 and 6,065 thousand tonnes respectively. 

With the anticipated rapid industrialization and economic growth in Africa, oil consumption will increase rapidly. This will especially be witnessed in rapidly reforming economies such as Uganda where demand is projected to rise at an average rate of 6–8% per annum. In Botswana, which has a relatively well-established economy, consumption has shown a 16% growth rate over the past five years. Countries that are not likely to register rapid economic growth are expected to have a growth rate of less than 5%. The current economic and political conditions are uncertain to allow the development of specific forecasts. 

This report is restricted to downstream petroleum sector activities, which include refining, marketing and distribution of petroleum products.  It covers pricing and taxation issues which can bring about favourable market conditions in the petroleum sector to ensure affordable, ample and secure supply of petroleum products; better distribution of petroleum products; lower operation costs for retailers of petroleum product; and, an enabling environment for both domestic and foreign investment in the petroleum sector. The report attempts to address these issues mainly in the continent and regional context.


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