Russian companies to build $12bn refinery complex in Angola

Angola has given two Russian companies the green light to build a major refinery complex and railroad that will help the African country – a major oil exporter – finally cut its dependence on imported petroleum.

The $12bn mega project is being put forward by companies Rail Standard Service and Fortland Consulting Company, which have set up a consortium with local partners.

Their aim is to build a 400,000-barrel per day refinery in the southwestern city of Namibe (its port pictured above). The work will also include a rail link to the newly refurbished Benguela railroad.

An order signed by Angolan President José Eduardo dos Santos on 9 March gives the Russian joint venture permission to develop 10 square kilometres of land, and commits the Angolan government to buying 364,000 bpd of petrol and other fuels as production increases over an 11-year period, reports Portuguese news site, Negocios.

The investors will benefit from eight-years of tax exemptions and will be allowed to repatriate their profits.

The first phase of this project will be a petroleum desalination unit to be built over three and a half years.

The project is Angola’s latest attempt to set up a refining and petrochemical industry to extract more value from its oil production, presently the largest in Africa at 1.7 million bpd.

Now the country relies on the Refinaria De Luanda, owned by state oil company Sonangol. This was built in 1955, and has an output capacity of something like 65,000 bpd. Products from this refinery are reportedly more expensive than imports. There is also the Chevron’s Cabinda Refinery, but this produces only 16,000 bpd.

As a result Angola is forced to import 80% of its petrol at a cost of about €160m a month – a serious drain on the country’s foreign currency reserves.

The government announced in 2015 that it was teaming up with a Chinese consortium to build a plant at Soyo, near Angola’s northern border with the Democratic Republic of Congo. This $14bn, 400,000 bpd scheme, to be called the Prince of Kinkakala, is now being "reassessed", according to the Angolan press.

Another plan to build a refinery at Lobito was shelved by Sonangol in August last year, citing lack of investment capital caused by the low price of crude.

The state also considered buying an off-the-peg refinery and shipping its oil there to be refined, which some Angolan economists argued would be cheaper option.

Angola also commissioned US engineer Bechtel to build a $9bn liquefied natural gas plant at Soyo. This was completed in 2013, but was shut down between April 2014 and June 2016 while design issues were addressed.

Image: The refinery is planned for the port of Namibe (Paulo César Santos)

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