Chad refinery shuts down again amid 'dialogue of the deaf'

Chad’s 50,000-b/d Djarmaya refinery, 40 km north of the capital Ndjamena, has been shut down by government officials again due to a dispute over the price of oil with supplier China National Petroleum Corp. International (CNPCI).

“The secretary-general of the trade and industry ministry has closed the Djarmaya refinery,” Chad’s state media announced. The refinery is co-owned by the CNPCI 60% and Chad’s state-owned Societe des Hydrocarbures du Tchad (SHT) 40%.

A government source said the facility was closed due to a disagreement over the price of oil between the Chadian authorities and CNPCI, the second closure in less than 6 months for the same reason.

“There is a dialogue of the deaf between the government and the Chinese to the point where industrial units had begun to close down for lack of oil,” a government official told AFP.

Last September, the Societe de Raffinage de N’Djamena (SRN) said the refinery would not operate for 40 days, starting on Sept. 25, due to a disagreement over price.

The refinery agreed a retail price of 41¢/l. of refined petroleum with the government, but World Bank figures show that refined products are sold in the country at a retail price of around $1.31/l.

“This discrepancy caused the refinery to operate at a loss of $4.7 million by end-August,” said IHS Global Insight analyst Marne Beukes, who added that “the loss of operations at the refinery will inevitably result in fuel shortages in Chad, which will require costly imports.”

Noting that CNPCI has become a vital investor in the country and is developing the Mimosa and Ronier oil fields as well as investing heavily in developing Chad's downstream sector, Buekes said Chad can “ill-afford a breakdown in its relationship with this important investor.”

The Djarmaya refinery, started up in June 2011, is designed to process oil from wells in the southern Bongor region through a 311-km pipeline.

In 2009, China National Petroleum Corp. (CNPC) announced plans to start the first refinery in Chad in partnership with the country’s government by 2011 (OGJ Online, Aug. 27, 2009).

The parties signed a memorandum of understanding on Aug. 24 for the N'Djamena refinery to establish a joint venture, secure a loan, and apply for a preferential export buyers’ credit (OGJ Online, Aug 29, 2009).

According to OGJ, Chad has 1.5 billion bbl of reserves and produces 120,000 b/d of oil. Chad exported 36.7 million bbl of its oil from January to November 2011, according to a statement issued by Cameroon-based Pipeline Pilot Steering & Monitoring Committee (PSMC).

Chad transports its crude through the 1,080-km Chad-Cameroon Pipeline, which is operated by ExxonMobil Corp., Chevron Corp., and Malaysia's Petroliam Nasional Bhd.

The line extends from the southern Chad oil fields in Doba to Cameroon's southeastern Atlantic port of Kribi. About 80% of the pipeline runs through Cameroon, giving Cameroon rights to royalties and monitoring of the tunnel.

Contact Eric Watkins at [email protected].