South Sudan’s Trinity Energy eyes domestic refinery despite local industry woes

Trinity Energy has ambitious plans to launch an oil refinery in South Sudan but regional instability is a major challenge for the country’s oil industry, writes Lennox Yieke.

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Image : ALI NGETHI/AFP

Trinity Energy, the oil marketer in South Sudan, is setting its sights on regional growth and domestic refining, according to deputy CEO Kenneth Mugambi.

Mugambi cites the launch of the Dangote refinery in Nigeria as an inspiration for the company’s push into oil refining, noting that the entry of pan-African financiers such as Afreximbank into the refining sector is a gamechanger for the industry.

Founded in 2012, the company holds a dominant position in South Sudan’s oil marketing sector, accounting for nearly 40% of the country’s petroleum product sales.

Since its founding, the company has predominantly focused on importing, distributing and retailing petroleum products. However, recent years have seen Trinity diversify its portfolio beyond downstream operations.

“We have diversified into upstream and are currently providing oilfield support services to the companies involved in exploration and production in South Sudan. This includes services such as drilling, engineering, logistics and accommodation. We are now working towards offering manpower contracting services,” says Mugambi.

The goal, he reveals, is to eventually leverage the experience in the upstream space to get into oil exploration and production. “We are using oilfield services as a stepping stone to operate our own production assets within South Sudan.”

South Sudan’s vast oil reserves – estimated to be 3.5 billion barrels, the fourth-largest in Africa after Angola, Nigeria and Libya – offer an opportunity for Trinity to ultimately venture into production, notes Mugambi.

“Oil production in South Sudan is dominated by Chinese, Indian and Malaysian national oil companies.” However, with barely 20% of the country’s proven reserves currently tapped, Mugambi sees significant opportunity for new players to enter the market.

Securing refinery funding in a tough environment 

While product diversification and regional expansion rank high on the agenda for Trinity Energy, its top priority remains securing funding for a planned refinery within South Sudan. “Building a refinery is our ultimate goal,” notes Mugambi.

If built, the refinery is planned to have a capacity of 60,000 barrels per day, but will progressively be scaled up to 200,000.

“In addition to the domestic South Sudan market we’re looking at Ethiopia being one of the main off-takers because of the proximity of the refinery to Ethiopia.”

Mugambi says significant progress has already been made towards making the refinery a reality, with the land for the site already secured in Paloch – a strategic location situated near crude oil production areas to minimise transportation costs. A concession agreement with the South Sudanese government is also in place. “We’ve completed preliminary studies, including feasibility, environmental impact, and topographical assessments,” explains Mugambi. “Our focus has now shifted to securing financing.”

South Sudan holds Africa’s third-largest oil reserves but has seen production fall dramatically from a peak of 350,000 b/d after independence from Sudan in 2011 to around 60,000 b/d in April this year according to the Platts OPEC Survey from S&P Global Commodity Insights. The country suffered a devastating civil war between 2013 and 2020, which was brought to a close by the launch of a unity government. 

Mugambi acknowledges that securing funding for a refinery in South Sudan is a major challenge. In a June review, the IMF said that South Sudan is significantly impacted by the war in neighbouring Sudan, especially from a very large and growing number of refugees, and by a sharp decline in oil production and exports since mid-February 2024 due to damages to the oil pipeline.

“The Sudan conflict has led to…rising oil production costs caused by the disruptions of operations at the Port of Sudan. Delays in the repair of the oil pipeline have reduced oil exports since mid-February 2024 to about one-third of their previous level. This has exerted pressure on South Sudan’s external and fiscal accounts given that oil exports account for nearly 90% of fiscal revenues and 95% of exports.”

Nevertheless, Mugambi says he is inspired by the launch of the Dangote refinery in Nigeria, a project which itself has been beset by difficulties including construction delays and a lack of local oil supply.

Hopes for African finance 

He notes that the traditional reliance on non-African financiers is a key obstacle to getting oil refining projects off the ground in Africa.

“Previously, financing options for such projects were limited to institutions outside Africa,” he explains.

“The emergence of institutions like Afreximbank is a game-changer, paving the way for the realisation of projects like the Dangote refinery.”

At a panel at the Afreximbank annual meetings, Aliko Dangote, highlighted the initial difficulty of securing financing on fair terms for his oil refinery and acknowledged Afreximbank’s $650m loan facility for the refinery.

Mugambi notes that Trinity Energy is exploring various financing options both within Africa and beyond.

 “Western partners have stepped away from financing refineries in Africa because of the energy transition, but we’re seeing Chinese and Middle East players coming in to fill the gap,” he says.

While acknowledging the need for the global energy transition, he notes that for South Sudan and many other African countries, obtaining financing to enhance energy access was a more crucial priority.

“Should our priority be charging electric vehicles or providing lighting for homes?” he asks. “We should first focus on ensuring a reliable and affordable supply of petroleum products before exploring alternative energy forms.”

Looking beyond financing, Mugambi expresses optimism about the evolving technological landscape for refinery development. “Traditionally, refinery technology was developed with large scale projects in mind and required large upfront investments,” he explains. “However, advancements in modular refining technology now allow for a more flexible approach. Companies can start smaller and gradually scale up their operations.”

Mugambi argues that the company’s goal is to move higher up the oil and gas value chain, as only this can translate into sustainable benefits in terms of creating quality jobs for the people and delivering increased revenue for the government.

Electric ambitions

Another area within South Sudan where Trinity is making headway is electricity generation. The country faces a major electricity deficit, with only 7.2% of the population connected to the national grid, according to the World Bank. This disparity is even starker in rural areas, where 5.6% have a connection, compared to urban centres (13.9% access).

To address this challenge, Trinity is rolling out mini-grid solutions in different states in the country. Mini-grids are localised power generation and distribution systems that offer a practical way to expand electricity access in underserved areas.

“In April we commissioned a 6.5 MW thermal power plant in Wau and plan to further scale this up with a 20 MW solar plant. We’re also developing additional mini-grids in Rumbek with a view to bridge the electricity gap and stimulate economic growth across South Sudan’s states,” says Mugambi.

Trinity’s diversification strategy includes not just expanding its business lines within South Sudan, but also establishing a regional presence across East Africa.

“We say we are indigenous to South Sudan, but are now transforming to become a pan-African integrated energy company.”

Mugambi says the company aims to double the number of fuel stations it operates in neighbouring Kenya by the end of the year. “We have a growing presence in Kenya and are moving from 14 stations to 20 stations by October and 30 by the end of the year.”

The Democratic Republic of Congo has also come under sharp focus following its recent decision to join the East African Community (EAC).

“Previously, we supplied fuel to wholesalers in the DRC,” says Mugambi. “Now, we’ve established a local office with the aim of launching retail operations by the end of the year, targeting Lubumbashi and Kolwezi.”

Trinity is also exploring expansion into Zambia and Tanzania.

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Lennox Yieke

Lennox Yieke is a business and finance journalist based in Kenya.