African Markets: what’s next? - afrra.org. CITAC... · MARPOL impact on African refining •...
Transcript of African Markets: what’s next? - afrra.org. CITAC... · MARPOL impact on African refining •...
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?
CITAC Africa Ltd. ARA AGM 2018 2
Annual State of the Nations
• What has happened?
• What might this mean for the future?
CITAC Africa Ltd. ARA AGM 2018 3
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
CITAC Africa Ltd. ARA AGM 2018 4
Infrastructure: Pipelines/Rail
• NMPP in RSA – Durban to Gauteng
• KPC pipeline (5) Mombasa to Nairobi
• Djibouti/Ethiopia railway
CITAC Africa Ltd. ARA AGM 2018 5
Infrastructure: Ports/berths
• MRS berth modifications
• Dakar petroleum berth rehabilitation
• OVH midstream jetty inauguration
CITAC Africa Ltd. ARA AGM 2018 6
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
CITAC Africa Ltd. ARA AGM 2018 7
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
CITAC Africa Ltd. ARA AGM 2018 9
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
CITAC Africa Ltd. ARA AGM 2018 10
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
CITAC Africa Ltd. ARA AGM 2018 11
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
CITAC Africa Ltd. ARA AGM 2018 12
Downstream outlook -Refining
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ja
nFe
bM
ar
Ap
rM
ay
Ju
nJu
lA
ug
Se
pO
ct
No
vD
ec
Ja
nFe
bM
ar
Ap
rM
ay
Ju
nJu
lA
ug
Se
pO
ct
No
vD
ec
Ja
nFe
bM
ar
Ap
rM
ay
Ju
nJu
lA
ug
Se
pO
ct
No
vD
ec
Ja
nFe
bM
ar
Ap
rM
ay
Ju
nJu
lA
ug
Se
pO
ct
No
vD
ec
2015 2016 2017 2018
Regional refinery utilisation rates
WCA ESA NA
WCA (f) ESA (f) NA (f)
CITAC Africa Ltd. ARA AGM 2018 13
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
CITAC Africa Ltd. ARA AGM 201814
AFRI Specifications - 2017
CITAC Africa Ltd. ARA AGM 2018 15
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
CITAC Africa Ltd. ARA AGM 2018 16
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
CITAC Africa Ltd. ARA AGM 2018 17
West Africa: ECOWAS
CITAC Africa Ltd. ARA AGM 201818
Benzene Aromatics
Olefins
After sulphur – what’s next?
Polycyclic Aromatic
Hydrocarbons
CITAC Africa Ltd. ARA AGM 2018 19
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
CITAC Africa Ltd. ARA AGM 2018 20
Major players:
CITAC Africa Ltd. ARA AGM 2018 21
Major players:
CITAC Africa Ltd. ARA AGM 2018 22
Major players:
CITAC Africa Ltd. ARA AGM 2018 23
Major players:
CITAC Africa Ltd. ARA AGM 2018 24
Retail investment
CITAC Africa Ltd. ARA AGM 2018 25
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
CITAC Africa Ltd. ARA AGM 2018 26
Price structures
Price structures in Africa
CITAC Africa Ltd. ARA AGM 2018 27
Creating the right environment
0
50
100
150
200
250
Inland infrastructure margins (gasoline)
Retail
Wholesale
Trucking
Bulk storage
$/mt
* Storage, jetty costs separated
CITAC Africa Ltd. ARA AGM 2018 28
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 Ltd. ARA AGM 2018 29
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.
CITAC Africa Ltd. ARA AGM 2018 30
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
CITAC Africa Ltd. ARA AGM 2018 31
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
CITAC Africa Ltd. ARA AGM 201832
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