African Markets: what’s next? - afrra.org. CITAC... · MARPOL impact on African refining • “International Convention for the Prevention of Pollution from Ships” carried out

CITAC Africa Ltd. ARA AGM 2018 1

Gary Still ARA WEEK

March 13th 2018

CITAC Africa Ltd

The Downstream African Energy Specialist

African Markets: what’s next?


Annual State of the Nations

• What has happened?

• What might this mean for the future?


Infrastructure: Storage

• Vopak in Durban

• Puma in Richards Bay and Tema

• Octogone/Socar in Cotonou

• Burgan in Cape Town

• Oiltanking in Maputo

• Sahara depot in Dar-es-Salaam

• KPC lease KPRL tanks in Mombasa

• Petrolex outside Lagos


Infrastructure: Pipelines/Rail

• NMPP in RSA – Durban to Gauteng

• KPC pipeline (5) Mombasa to Nairobi

• Djibouti/Ethiopia railway


Infrastructure: Ports/berths

• MRS berth modifications

• Dakar petroleum berth rehabilitation

• OVH midstream jetty inauguration


Infrastructure: LPG

• Sunrise LPG depot at Saldanha bay

• Sodigaz depot in Lome

60%16%

6%

6%

12%

LPG demand 2030

NAF WAF CAF SAF EAF


Infrastructure: Investment/Divestment

• Shell divests from Vivo

• Total buys Gapco

• Vivo/Engen share transaction

• Chevron divesting from the RSA market

Petrolworld

CITAC Africa Ltd. ARA AGM 20188

Africa electrification rates

Forecast assumptions: Oil to remain a vital source of energy

0

200

400

600

800

1,000

1,200

1,400

1,600

2014 2020 2025 2030 2035 2040

African primary energy mix forecast

Bioenergy

Renewables

Hydro

Nuclear

Coal

Gas

Oil

Source: IEASource: IEA

22% 22% 22% 22% 22%14%

13% 15% 16%18%14% 13%

12%12%

12%48%

48%47%

44%40%

mtoe

21%

20%

13%

36%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

100

200

300

400

500

600

700

800

900

1 000

West Africa

Total population growth rate

mn

people


AFRICA balances to 2030

50,000

70,000

90,000

110,000

130,000

150,000

170,000

190,000

210,000

230,000

000mt

Africa's Growing Clean Product Shortfall

(2000-2030)

Clean products demand

Clean products demand (f)

Clean product output

Output (forecast Scenario 1)

Output (forecast Scenario 2)

102.2mn

mt87.3mn

mt

43.2mn

mt


Products shortfall grows very rapidly

-70,000

-60,000

-50,000

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

'000 m t Historical Balance in Sub-Saharan Africa

Others

Fuel Oil

Gasoil

Jet/Kero

Gasoline

Naphtha

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

'000 m tHistorical Balance in

North Africa

Others

Fuel Oil

Gasoil

Jet/Kero

Gasoline

Naphtha


Products trends to 2030

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

LPG Gasoline Jet Kerosene Gasoil Fuel Oil

Products growth rate: CAGR 2017-2030

Africa

NAF

WAF

CAF

SAF

EAF


Downstream outlook -Refining

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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No

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No

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Ja

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No

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No

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ec

2015 2016 2017 2018

Regional refinery utilisation rates

WCA ESA NA

WCA (f) ESA (f) NA (f)


Demand vs. refining capacity

-10,000

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

190,000

Demand Ref. Output

000mt

Africa Products Slate 2017

LPG

Gasoline

Jet/kero

Gasoil

Fuel Oil

Others

5% 2%

58%

16%

19%

Regional refining capacity

CA

EA

NA

SA

WA


AFRI Specifications - 2017


1 Jan 2015: New standard begins: Gasoline 93 RON, Gasoil 50ppm

1 Jan 2014: New standard begins: Gasoline 91 RON, Gasoil 500ppm

Official EAC specs published in 2012 stating that Phase 1 must begin on 1 Jan 2014

2011: EAC begins circulating draft standards to stakeholders who were invited to comment

In adopting and enforcing the new specs, the EAC was helped greatly by the closure of KPRL (the Kenyan refinery)

In the run up to harmonization, KPRL was granted a waiver to continue to produce 8,000ppm S gasoil until end of 2014

The owners of the refinery were expected to perform necessary work to meet new specs

of Phase 2

Owners could not justify the investments; KPRL closed in Aug 2013

East Africa: EAC


Jun 2017: In order not to force refiners to operate unlawfully, Law is repealed; CF2 not implemented

2012: Law adopted requiring CF2 to be implemented by July 2017. Years pass without agreement between SAPIA and SA Government

SAPIA (oil sector trade body): asks South African government to impose a levy on pump prices to recover investments in clean fuels production

2011: Deadline for CF2 announced; to be implemented by July 2017: new specifications to be 10ppm S for gasoline and gasoil. Reduced benzene in gasoline

2006: Clean Fuels I launched: no lead in gasoline, Sulphur in gasoil reduced from 3000ppm to 500ppm with parallel introduction of 50ppm S. No early indications of specs for CF2. Refiners unable to make necessary investments, they

adopt a “wait and see” approach

South Africa Clean Fuels programme


West Africa: ECOWAS


Benzene Aromatics

Olefins

After sulphur – what’s next?

Polycyclic Aromatic

Hydrocarbons


MARPOL impact on African refining

• “International Convention for the Prevention of Pollution from Ships” carried out by the International Maritime

Organisation (IMO) - More commonly known as MARPOL

• Maximum sulphur limit of 0.50% to apply to all FO bunkers (unless scrubber installed) from 1 January 2020

• Decision made by IMO in October 2016

• South African HFO output will need to find new homes, or the industry will need to invest in improving FO quality

– otherwise refinery closures?

• Very low sulphur fuel oil and VGO prices are expected to rise closer to distillate prices

• Bad news for producers of high sulphur fuel oil, who have been reliant on the bunker market

• Take-up of scrubbers by ship owners expected to be slow. Some observers forecast a return for HSFO markets by

2023/24 once scrubbers have been fitted.

• All about compliance


Major players:


Major players:


Major players:


Major players:


Retail investment


Africa: Regulatory environment

• Similarities:

– Very high overall level of regulation

– Price regulation in 50 out of the 54 countries in Africa

– Very high government involvement in the downstream oil sector

(procurement and supply chain)

• Differences:

– 54 countries, very little regional harmonisation in some regions

– 50 different price structures

– Disparity in product specifications, e.g. West, North Africa

– Different product import arrangements


Price structures

Price structures in Africa


Creating the right environment

0

50

100

150

200

250

Inland infrastructure margins (gasoline)

Retail

Wholesale

Trucking

Bulk storage

$/mt

* Storage, jetty costs separated


What next?

• Population and GDP growth creating higher demand growth

• Energy from different sources, new gas, renewables but oil share

forecasted to remain unchanged in % terms.

• The supply/demand short fall will continue to grow

– Boosting import requirements

– Driving further investments in supply chain infrastructure

• Increased focus on ‘cleaner fuels’

• Increased involvement by the ‘new Majors’ in the whole supply

chain


CITAC Africa LtdAldermary House

10-15 Queen Street

London, EC4N 1TX, UK

Tel: +44 (0)207 343 0014

E-mail: [email protected]

Web: www.citac.com

CITAC® is a registered trademark. Any reproduction of information contained within this presentation requires CITAC’s permission.

mailto:[email protected]

http://www.citac.com/


African refinery performance

African refinery output is estimated to have decreased by 1.8% y/y in 2017 to 101.3mn mt Decrease led by West and Central Africa (-12.8% and -14.6% y/y respectively) North Africa: +1.0% y/y to 59.4mn mt

For further details on African refinery operations, planned upgrades and capacities, please refer to Section

4 Logistics

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

000mt

African Refinery Output

North Africa West & Central Africa Southern & East Africa


Product analysisGasoil is the main product consumed in Africa;

consumption grew by 0.8% in 2017 to 80.8mn mt

(1.65 b/d)

Gasoline is the second-largest product; its demand

increased by 0.6% y/y to 50.4mn mt (1.2mn b/d) in

2017

North Africa:

• Gasoline was the strongest-growing product in

2016 (+6.5% y/y), followed by gasoil and LPG; in

2017 growth slowed down

Sub-Saharan Africa:

• LPG (+7.8%) and fuel oil (+3.8%) the products with

strongest growth in 2017

• Gasoil: +1.0% y/y primarily due to contraction in

Central Africa (Angola) with -7.1% y/y

• Nigerian LPG demand increased significantly

(+19.1% y/y), after years of constrained supply;

gasoil demand also increased

• South Africa gasoil demand -1.6% y/y

• Jet demand increased & kerosene demand fell:

– Jet: East Africa (+16.8%), Southern Africa

(+7.6%), but down in North, West and

Central Africa

– Kerosene: inter-fuel substitution (LPG,

electrification, biomass; constrained supply

or removal of subsidies) -12.1% in WAF

(Nigeria subsidy removal)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

North W&C S&E

000mt

Regional Oil Products Demand 2017

LPG

Gasoline

Jet/kero

Gasoil

Fuel Oil

Others

-11.0%

-6.0%

-1.0%

4.0%

9.0%

Products growth rate: CAGR 2000-2017

Africa

NAF

WAF

CAF

SAF

EAF


Storage turnover rates

• The graph on the left represents hypothetical tank turnover rates by region in 2016, based on a straight ration of annual demand to storage capacities. This analysis suggests very low storage turnover rates – however, in reality, there is much storage capacity that lies underused or idle in many of these regions, such as the inland PPMC

depots in Nigeria.

• Storage turnover rates vary dramatically from depot to depot, depending on an array of different factors, including whether their role is to hold security stocks, whether they are depots that are coastal and therefore handle volumes that are then forwarded to other depots or to transit markets.

• Given that most terminals operate on a per-ton throughput basis, lower tank throughput rates result in reduced revenues for the owners and operators of the terminals.

• Taking hypothetical tank turnover rates and

mapping them against demand growth gives an illustration of future storage requirements. This is represented in the graph, opposite.

• This rough calculation suggests there is significant scope for oil product storage terminal construction across the continent, with particularly strong requirements in Central Africa, where strong demand growth is forecast in major markets such as Angola and DRC, as well as in East Africa, where market such as Ethiopia, Kenya and Sudan are underpinning the region’s oil product demand outlook.

0

0.5

1

1.5

2

2.5

3

3.5

4

CA WA EA SA

Hypothetical regional tank turnover rates# Days

3,349

14,593

6,340 8,090

7,363

3,728

5,045 2,313

-

5,000

10,000

15,000

20,000

CA WA EA SA

Storage Capacity (M3) current and forecast

requirement

2016 2030

000m3

Documents

African Markets: what’s next? - afrra.org. CITAC... · MARPOL impact on African refining • “International Convention for the Prevention of Pollution from Ships” carried out