Africa's downstream energy sector emerging as major investment frontier – ARDA

Africa’s downstream energy sector is increasingly being positioned as one of the world’s next major investment frontiers, as rising population, urbanisation and industrial growth drive unprecedented demand for fuel and clean cooking solutions.

The African Refiners and Distributors Association (ARDA) says while the continent has enormous energy potential, attracting global capital will depend on improving bankability through regulatory discipline, infrastructure development and harmonised fuel standards.

A statement issued by Anibor Kragha, Executive Secretary of ARDA, said investors were not deterred by demand, but by uncertainty.

“Africa has plenty of potential, but capital flows to predictability, discipline and credibility,” the statement said in an industry brief, noting that fragmented regulations, weak infrastructure and financing risks had historically undermined investor confidence in downstream projects.

It said Africa’s energy demand is projected to grow sharply over the coming decades. By 2050, one in every four people globally was expected to live on the continent, intensifying demand for refined petroleum products, LPG and associated infrastructure.

ARDA estimated that crude oil consumption in Africa could rise from about 1.8 million barrels per day in 2024 to 4.5 million barrels per day by 2050.

Despite this growth, it said downstream investment had lagged behind upstream production, forcing many countries to export crude oil while importing refined products at higher cost.

The Organisation of Petroleum Exporting Countries (OPEC) estimates that Africa would require more than 100 billion dollars in refining investment by 2050 to meet rising demand, including upgrades to existing facilities, refinery expansions and new projects, the statement said.

It, however, said many downstream projects across the continent struggle to reach financial close due to what it describes as a “bankability gap”.

Global investors, it noted, required stable regulatory frameworks, predictable feedstock supply, bankable offtake arrangements, enforceable contracts and credible project preparation.

It said often countries encountered inconsistent fuel standards, shallow ports, congested depots, limited storage capacity, exchange-rate volatility and policy uncertainty.

“One major constraint identified is the lack of harmonised fuel specifications across Africa. Out of 54 countries, 46 maintain national fuel standards, resulting in 12 different gasoline grades and 11 diesel grades, with sulphur levels varying widely,” it said.

The statement said that upgrading African refineries to cleaner fuel standards would require about 16 billion dollars in investment, and that such spending would unlock regional trade, reduce costs, improve public health and align the continent with global fuel norms.

“Infrastructure bottlenecks also continue to weigh heavily on the sector. A 2024 industry whitepaper cited by ARDA highlights shallow ports, congested berths, inadequate storage, overused roads and pipelines, and single points of failure across fuel supply chains,” it said.

“These inefficiencies, ARDA said, add between 20 and 30 dollars per tonne to landed fuel costs and weaken confidence in the reliability of supply systems, even as new refining capacity, including the Dangote refinery, comes onstream.”

The statement said ARDA pointed to clean cooking as one of Africa’s most significant untapped energy markets.

More than one billion Africans it said relied on biomass for cooking, with the number increasing by about 220 million since 2010, posing serious health, environmental and social risks.

The Association said the scale of unmet demand makes Africa one of the most attractive global markets for liquefied petroleum gas (LPG) investment.

The statement recommended a blueprint aimed at making Africa’s downstream markets more investment-ready to address the issues.

It called for priorities, including harmonising low-sulphur fuel standards, rebuilding infrastructure across the value chain, embedding regulatory and investment discipline, scaling up LPG adoption and developing a pipeline of bankable projects.

The statement said it was working with the African Union Commission, United Nations agencies and regional economic communities to promote cleaner fuels, while also advocating deeper ports, expanded storage, rehabilitated pipelines and more resilient logistics systems.

It said it was also supporting initiatives to mobilise large-scale financing for clean cooking, including a proposed one-billion-dollar LPG fund to support bankable projects across the continent.

“Through thematic workgroups, training programmes and high-level industry forums, ARDA says it is building technical capacity, strengthening governance and supporting the development of a skilled workforce to drive Africa’s energy transition,” it said.

Africa’s downstream sector represents one of the last large-scale, high-growth energy investment opportunities globally.

“For investors seeking long-term returns anchored in real demand, Africa’s downstream sector is not just an opportunity, it is the next frontier,” it said, stressing that sustained capital inflows would depend on discipline, transparency and credible project delivery.