The structure of Cameroon’s petroleum production, storage, and distribution revolves around two independent entities; the National Refinery (SONARA), and the Cameroon Petroleum Depot Company (SCDP). SONARA, which is more than 80 percent state-owned, is the country's sole refinery, based in Limbé, and refines imported light crude oil from Nigeria, Equatorial Guinea, and Angola. SCDP is a 51 percent state-owned firm, tasked with securing the supply of petroleum products to Cameroon’s end-users.

SCDP handles petroleum product storage and distribution throughout the country, to and from its 12 depots: Bafoussam (1), Balabo (1), Garoua (1), Ngaoundéré (1), Yaoundé (3), and Douala which together can store 268,000 cubic meters of liquid fuels. SCDP purchases most of SONARA’s output, which is shipped by the main domestic shipping company (Camship) to its main depot in Douala. SCDP also procures additional refined products abroad to meet domestic demands.

Distributors and retailers, which together own the remaining 49 percent in SCDP, market the petroleum products secured by SCDP. Distribution is done by trucks, except for the North, Extreme North, and Adamoua regions, which are serviced by the main railways operator (Camrail).

Retail prices of the three main petroleum products (gasoline, kerosene, diesel) have been fixed since 2008 (Figure I.1). The sector is regulated by the Caisse de Stabilisation des Prix des Hydrocarbures (CSPH), a public company with regulatory powers that was set up in 1974. Its mission is to protect the consumers from fluctuations in the international price of hydrocarbons. In doing so, it sets domestic retail prices and subsidizes transport to remote regions. It underwrites the losses of the operators in the sector, which are in turn taken over by the state.

The design of the pricing formula raises several issues. Among them are (i) the existence of the SONARA markup, above and beyond the international price for refined products, that already includes a profit margin for cost-effective refineries; (ii) the “cost plus” principle for calculating the SONARA markup, which does not provide incentives for efficiency gains; and (iii) the relatively large share of ad valorem taxes (including the SONARA markup), which exacerbates the volatility of the national pump price and thus of the subsidies.

The inconsistent implementation of the pricing formula has compounded its design issues. The state has delayed paying compensation to SONARA because of the magnitude of the subsidy, compounded by the “cost plus” design of the formula.

NB: This appendix was prepared by IMF’s Jean van Houtte and Samah Mazraani.