African Markets: what s next?

Transcription

1 African Markets: what s next? Gary Still ARA WEEK March 13 th 2018 CITAC Africa Ltd The Downstream African Energy Specialist CITAC Africa Ltd. ARA AGM

2 Annual State of the Nations What has happened? What might this mean for the future? CITAC Africa Ltd. ARA AGM

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

4 Infrastructure: Pipelines/Rail NMPP in RSA Durban to Gauteng KPC pipeline (5) Mombasa to Nairobi Djibouti/Ethiopia railway CITAC Africa Ltd. ARA AGM

5 Infrastructure: Ports/berths MRS berth modifications Dakar petroleum berth rehabilitation OVH midstream jetty inauguration CITAC Africa Ltd. ARA AGM

6 Infrastructure: LPG Sunrise LPG depot at Saldanha bay Sodigaz depot in Lome LPG demand 2030 NAF WAF CAF SAF EAF 6% 6% 12% 16% 60% CITAC Africa Ltd. ARA AGM

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

8 Forecast assumptions: Oil to remain a vital source of energy mtoe 1,600 1,400 1,200 1, African primary energy mix forecast 36% 40% 44% 47% 48% 48% 13% 12% 12% 12% 20% 14% 13% 18% 13% 15% 16% 14% 22% 22% 22% 22% 22% 21% Bioenergy Renewables Hydro Nuclear Coal Gas Oil Source: IEA Africa electrification rates mn people West Africa 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Total population CITAC Africa Ltd. ARA AGM 2018 growth rate 8

9 AFRICA balances to mt 230, , , ,000 Africa's Growing Clean Product Shortfall ( ) Clean products demand Clean products demand (f) Clean product output Output (forecast Scenario 1) Output (forecast Scenario 2) 150, , ,000 90,000 70,000 50, mn mt 102.2mn mt 43.2mn mt CITAC Africa Ltd. ARA AGM

10 Products shortfall grows very rapidly '000 m t 30,000 Historical Balance in North Africa 20,000 10, ,000 Others Fuel Oil Gasoil Jet/Kero '000 m t 20,000 Historical Balance in Sub-Saharan Africa -20,000-30,000 Gasoline Naphtha 10, ,000-10,000-20,000-30,000 Others Fuel Oil Gasoil Jet/Kero -40,000 Gasoline -50,000 Naphtha -60,000-70,000 CITAC Africa Ltd. ARA AGM

11 Products trends to % Products growth rate: CAGR Africa 8.0% 6.0% 4.0% 2.0% NAF WAF CAF SAF EAF 0.0% -2.0% -4.0% LPG Gasoline Jet Kerosene Gasoil Fuel Oil CITAC Africa Ltd. ARA AGM

12 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Downstream outlook -Refining Regional refinery utilisation rates 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% WCA ESA NA WCA (f) ESA (f) NA (f) CITAC Africa Ltd. ARA AGM

13 Demand vs. refining capacity Africa Products Slate 2017 Regional refining capacity 000mt 190,000 5% 2% CA 170,000 19% 150, , ,000 90,000 70,000 50,000 LPG Gasoline Jet/kero Gasoil Fuel Oil Others 16% 58% EA NA SA 30,000 WA 10,000-10,000 Demand Ref. Output CITAC Africa Ltd. ARA AGM

14 AFRI Specifications CITAC Africa Ltd. ARA AGM

15 East Africa: EAC 2011: EAC begins circulating draft standards to stakeholders who were invited to comment Official EAC specs published in 2012 stating that Phase 1 must begin on 1 Jan Jan 2014: New standard begins: Gasoline 91 RON, Gasoil 500ppm 1 Jan 2015: New standard begins: Gasoline 93 RON, Gasoil 50ppm 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 CITAC Africa Ltd. ARA AGM

16 South Africa Clean Fuels programme 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 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 SAPIA (oil sector trade body): asks South African government to impose a levy on pump prices to recover investments in clean fuels production 2012: Law adopted requiring CF2 to be implemented by July Years pass without agreement between SAPIA and SA Government Jun 2017: In order not to force refiners to operate unlawfully, Law is repealed; CF2 not implemented CITAC Africa Ltd. ARA AGM

17 West Africa: ECOWAS CITAC Africa Ltd. ARA AGM

18 After sulphur what s next? Benzene Aromatics Polycyclic Aromatic Hydrocarbons Olefins CITAC Africa Ltd. ARA AGM

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

20 Major players: CITAC Africa Ltd. ARA AGM

21 Major players: CITAC Africa Ltd. ARA AGM

22 Major players: CITAC Africa Ltd. ARA AGM

23 Major players: CITAC Africa Ltd. ARA AGM

24 Retail investment CITAC Africa Ltd. ARA AGM

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

26 Price structures Price structures in Africa CITAC Africa Ltd. ARA AGM

27 Creating the right environment $/mt Inland infrastructure margins (gasoline) Retail 150 Wholesale Trucking 0 Bulk storage * Storage, jetty costs separated CITAC Africa Ltd. ARA AGM

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

29 CITAC Africa Ltd Aldermary House Queen Street London, EC4N 1TX, UK Tel: +44 (0) Web: CITAC is a registered trademark. Any reproduction of information contained within this presentation requires CITAC s permission. CITAC Africa Ltd. ARA AGM

30 African refinery performance 000mt 160,000 African Refinery Output 140, , ,000 80,000 60,000 40,000 20,000 0 North Africa West & Central Africa Southern & East Africa 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 CITAC Africa Ltd. ARA AGM

31 Product analysis Gasoil is the main product consumed in Africa; consumption grew by 0.8% in 2017 to 80.8mn mt (1.65 b/d) 000mt 90,000 Regional Oil Products Demand 2017 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 80,000 70,000 60,000 50,000 40,000 30,000 LPG Gasoline Jet/kero Gasoil Fuel Oil Others Sub-Saharan Africa: 20,000 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) 10, % 4.0% -1.0% -6.0% -11.0% North W&C S&E Products growth rate: CAGR Africa NAF WAF CAF SAF EAF CITAC Africa Ltd. ARA AGM

32 Storage turnover rates # Days CITAC Africa Ltd. ARA AGM m 3 20,000 15,000 10,000 5,000 - Hypothetical regional tank turnover rates CA WA EA SA Storage Capacity (M3) current and forecast requirement 7,363 3,349 3,728 14,593 5,045 2,313 6,340 8,090 CA WA EA SA 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. 32