Chief Executive Officer of ATMIN, Ajay Oomen, has maintained that Africa’s dependence on exporting crude oil while importing refined petroleum products exposes the continent to foreign exchange pressures, supply disruptions and risks arising from global energy market shocks.
Speaking during an interview with ARISE NEWS on Wednesday, Oomen said Africa needed to strengthen its refining capacity, build strategic petroleum reserves and improve foreign exchange stability to retain more value from its natural resources and protect its economies from external shocks.
“Africa structurally, I mean, it’s a very strategic paradox. Africa exports oil, imports products. With that, imports other people’s risk. That’s what we are facing here.”
On the implications of the Iran war for global energy markets, Africa and Nigeria, Oomen identified foreign exchange pressures. “The problem is also more to do with foreign exchange. The problem is more to do with strategic reserves. And the problem is more to do with the refining capacity.”
He said Nigeria had an opportunity to earn more from crude oil exports as international prices remained high. “On the positive side, Nigeria’s budget is at $65 a barrel, 1.86 million barrels of oil to be exported. We are hovering around 1.6 here. And so, there’s a chance to export more, capture more value out of this.”
Oomen stated that the Dangote refinery had helped Nigeria avoid the fuel shortages experienced in other African countries with inadequate refining capacity. “On the other side, Nigeria is blessed because of the Dangote refinery. The oil prices are high, but there’s no shortages. If you look at other African countries, which there is a refining capacity issue, there’s pump queues, there is unrest.”
He urged that African countries needed to focus on expanding domestic refining. “So, we have to spend more time on bringing this foreign exchange stability, rather than talking about subsidies in my mind, bringing about more of refining capacity on stream, and bringing strategic storages.”
Ooman suggested that governments could provide targeted support to vulnerable households. “The key is to not to have shortages. Yes, high prices there, that reflects the market. What can you do about that? You can then do a targeted subsidies or targeted support for the vulnerable families or SMEs, which needs, which are diesel dependent.”
On the impact of the Iran war on global oil prices, he confirmed prices could remain high until the middle of next year. “The withdrawal of about one billion barrels from strategic stocks had created additional demand that would remain even if shipping through the Strait of Hormuz and the Bab el-Mandeb resumed normal operations. let’s hope that diplomacy takes a chance now and diplomacy wins.
We can expect the oil price to still remain higher until mid to next year, roughly. And the reason is the strategic stocks worth a billion barrels have been withdrawn during this crisis now. So that needs to be replenished.”
He said oil supplies were available but the disruption to transportation had restricted the movement of crude. “The production of oil, the US is producing 13.5 million barrels of oil per day. It’s a record high. So the supply side, there is enough oil available. It’s just the transport. It’s just the flow, which is hampered right now, which will all get smoothened out, and the oil prices should fall massively.”
Oomen confirmed that oil prices could stabilise at about $70 a barrel if diplomatic efforts succeeded. “There are various estimates, I believe the estimate of $70. That’s where it should stabilise if the peace prevails.”
He warned that a further escalation of the conflict, particularly a closure of the Strait of Hormuz. “If the Hormuz gets closed, if the shippers start getting stressed out and there’s no, let’s say transport happening from over the 20% of the oil, oil will definitely go up. We saw 119, 116 the last week. You can expect it to go further up.”
On the proposed windfall tax on oil companies benefiting from higher prices, Oomen opposed the measure. “So to come to the question of windfall tax, the problem starts as the upstream companies take heavy risk and we want to incentivise them to produce more. The refiners who put up the big refineries take a big risk and we want them to continue to invest more into the refining sector. So I think windfall tax looks good, but is not a good idea.”
On Africa’s response to the energy crisis, he said the African Export-Import Bank had announced a $20bn foreign exchange support package for African countries following the Gulf war. “Right straight after the Gulf War, African Bank immediately announced a relief with a $20 billion package for foreign exchange support to the countries. And African Bank also, this year, led about $4 billion of refinancing package for Dangote II, of which two and a half by African Bank alone, other African institutes stepped in.
“It’s not foreign institutes, it’s African institutes. That’s good news.”
Oomen explained that ATMIN was majority-owned by Afreximbank and was established to ensure that more of the value generated from trading African commodities remained within the continent. “Atmin is a majority-owned company for Afrixim Bank. We are into commodity trading. Afrixim Bank’s big vision was the value of trading value of commodities, whether it’s oil and gas or minerals, goes to London or Geneva. Why not Africa? Why can’t it be captured back into Africa?”
He said the company recorded more than $3bn in trade during its first year of operations and expected to expand its activities. “And this was our first year of trading. With their support, we traded over $3 billion of trade, and we are expecting to grow further.”
Oomen said ATMIN and Afreximbank also provided financing and support to smaller oil producers. “Afrixim Bank and Professor Oramah, in particular, who is the ex-president, his vision is that we should have a platform where we can finance them. Because their problem is financing, first. Second, evacuation. They can’t evacuate properly, most of them are onshore. And third is aggregation. Because you can’t sell 3,000 barrels a day. You have to build it to a cargo size, which is a million barrels. So, aggregation, and then monetisation.”
He said the company worked with Afreximbank to provide financing. “Absolutely. We work with Afrixim Bank. We’ll together fund the project. We do the risk management because we are together on it. And Afrixim Bank has been a big, substantial provider of financing for the whole of the continent.”
On the outlook for the global oil market, Oomen said increased production from countries outside the traditional major oil-producing bloc could weaken OPEC+’s influence over supply. “I personally think, I mean, again, OPEC Plus strengths have diminished when the UAE walked out, and they produce more than 3 million barrels a day. That’s a big one.”
He said new production from emerging oil producers and existing suppliers could eventually push prices down. “So we’re going through a super cycle right now, typical commodity super cycle. So it will come down. And when it comes down, you are talking about oversupply, because the demand destruction has happened before.”
Oomen added that oil prices could fall substantially by 2028 if peace prevailed and additional supplies entered the market. “I mean, Guyana alone is going to produce a million barrels. Five years back, they were not even existent. Suriname is going to produce very shortly. And as I said, the US is at record high production. So you have enough supplies coming in.”
“If all this happens, the oil price should come down substantially in my mind.”
Erizia Rubyjeana
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