Suleiman Yahyah, Chairman of Rosehill Group Limited, stated that West Africa could create a $3 trillion cumulative energy market by 2035 if its 16 nations transition from functioning as independent national markets to a linked regional system.
According to Yahyah, the region might expedite the growth of its energy market by developing interconnected systems with shared data standards, regional infrastructure, common product specifications, and a single dispute resolution process, as opposed to pursuing discrete initiatives.
In order to create an open regional pricing structure for refined petroleum products, regulators, refiners, dealers, financiers, and other energy players gathered in Abuja on Wednesday for the second West Africa Refined Fuel Market Conference.
The West Africa Regulators Forum, S&P Global Commodity Insights, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority collaborated to sponsor the conference.
“Funding West Africa Infrastructure & Distribution to Create a Transparent Market for Regional Price Benchmarks” was the focus of the two-day event.
In his keynote address, Yahyah claimed that West Africa’s energy market had reached a turning point, especially in light of significant refining expenditures and shifts in international energy markets.
He contended that because advancements in energy infrastructure and refining were starting to alter the industry’s structure, the area could no longer be characterized as solely an emerging market with enormous potential.
“This market was full of potential once upon a time, a few months ago,” he said. However, the circumstances have shifted over the past several months, and we are currently overseeing six phases for emerging markets in the energy platforms.
“We are no longer a potential; we are at the crossroads for an infant or emerging market composition with the presentation completed yesterday and the significant investments in refining and changing dynamics in global markets.”
He believes that building a functional regional energy system that can effectively transfer goods, capital, and information across borders should be the next step.
He claimed that while creating an integrated market structure could hasten the adjustment of the region’s energy imbalances, concentrating solely on individual projects might take decades.
“How do you get there?” asked the national honoree. It will take us many, many years to reach our goals if we think in terms of projects. However, we might be able to address today’s inequalities more quickly if we think in terms of systems. What comes next, then? West Africa will engage in regional trade instead of national competition. In other words, we coordinate operations so that a Ghanaian-licensed operator can conduct business and transact in Nigeria.
And it will entail having shared data standards, a contemporary energy contract, infrastructure to support it, and a regional dispute resolution process. If we do that, it is possible that by 2035, we can have a market that is $3tn cumulative.
“And this would imply that the market has debt, integration, and connections to international platforms, as well as the fiscal system where we see the fiscal transaction. For example, if you look at the electricity market, there are numerous cables connecting the region, and the gas market, but trade is between 8 and 12 percent.” In other words, the market can now converge in situations where transactions are not simply stationary but also follow opportunities.
Africa’s vast population and energy resources, according to Yahyah, have not resulted in sufficient access to reasonably priced and clean energy.
He pointed out that hundreds of millions of people still live in energy poverty despite Africa producing about 7.5% of the world’s hydrocarbons and making up around 20% of the world’s population.
He claimed that the situation was even more concerning in West Africa, where he calculated that almost 75% of people lacked access to clean power and that 45% of the population still lived in energy poverty.
He stated, “You can correlate these stylized facts for West Africa and think that West Africa too is at 45% energy poverty and about 75% without access to clean power.”
Yahyah contended that the region’s opportunity lay not only in increasing oil and gas production but also in capturing more of the financial value generated by energy trading, market information, risk management, and price discovery.
According to him, a large portion of the value in the world’s energy markets was held by organizations that owned the platforms, technologies, methods, and information necessary for contemporary markets to operate rather than the actual resources.
He listed organizations that get significant commercial value from the infrastructure underlying commodities markets, including global benchmark and market institutions, exchanges, and data suppliers.
These organizations do not possess the resources or molecules. They have really skilled individuals that drive these markets, and they possess technology, processes, and information, he said.
The chairman of the RHG suggested a regional organization wherein various nations would create specialized positions according to their strategic advantages.
He emphasized that rather than trying to start from scratch, West Africa must build its own market infrastructure while forming strategic alliances with international organizations.
According to him, Lagos could become the Atlantic hub for liquidity and refining, Senegal might function as a western gateway, Abidjan as a commercial and logistics hub, and Ghana as a balancing and storage center.
“There are sixteen countries in the West African region,” he said. If we follow the market’s natural evolutionary path, we can get there.
Senegal is already the gateway on the western side, with about 250,000 miles of production and a lot of potential. The center for commerce and logistics need to be Abidjan. Ghana: storing and balance. Lagos ought to serve as the Atlantic hub for refinancing and liquidity. West Africa will engage in regional trade and national competition. In other words, we coordinate operations so that a single operator of a Ghanaian licensee can do business and transact in Nigeria.
“And that will mean that we have a modern energy contract, shared data standards, common product specifications, infrastructure to support it, and a regional dispute resolution mechanism.”
He said that regional integration would enable the market to grow to a size and liquidity that would enable it to connect to international trading platforms.
The plans coincide with increased attempts by industry participants and West African regulators to establish a regional reference market for refined petroleum products.
Despite having substantial crude oil and gas resources, the region has long been very vulnerable to global pricing benchmarks, supply disruptions, freight costs, and geopolitical shocks.
The development of significant refining capacity in Nigeria, especially the Dangote refinery, has altered the outlook for supply in the area and opened the door to increased local and regional price discovery.
However, Yahyah contended that refining capacity by itself would not provide a developed market.
According to him, the area needs to develop the financial, legal, technological, logistical, and human infrastructure necessary for the free movement and transparent trading of refined goods.
In the end, the suggested concept would connect financial markets with physical infrastructure, forming an integrated system that would allow capital, goods, and market data to flow internationally.
If the plan is carried out well, West Africa may be able to transition from a collection of disjointed national energy markets to a regional marketplace that can draw in international investment while keeping a larger portion of the value produced by its own resources.
