AFRICAN REFINERS ASSOCIATION Challenges and Opportunities ANNUAL GENERAL MEETING PRESIDENT S OVERVIEW CAPE TOWN MARCH 11 TH 2008
2007-08 Achievements
2007-08 achievements EXECUTIVE COMMITTEE MEETINGS Casablanca May Luanda September Accra December Cape Town - March 3 rd AGM ( AFRICAN REFINERS WEEK ) Participation growing each year
2007-08 achievements Workgroup Events since 2007 AGM Casablanca: AFRI specs meeting (May) Luanda: S & E specs meeting (Sept) London: Database training (July) Washington: Strategy meeting with WB (Oct) Dakar: Laboratory managers (Nov) Abidjan: Medical professionals (Nov) Accra: W&C Specs (Dec) Washington: Strategy meeting with WB (Feb) Abidjan: Safety officers (Feb) Cape Town: Communications Managers (Mar) Cape Town: Database training (Mar)
2007-08 achievements Since last AGM over 250 representatives from Members and AM s have participate in ARA organised meetings. Results include: Relationships built Technical knowledge exchanged Problems shared Decision makers educated
2007-08 achievements Gold and Diamond Sponsors Silver Sponsors 17 this year Many kinds of partners Traders, Banks, Equipment suppliers
Challenge 1: Threats from Asia and the Middle East
Impact of new Indian/ME refineries Indian refining capacity increases* will result in additional clean products exports: mt/yr 2008 2013 Reliance 18,600,000 37,400,000 Essar 7,300,000 23,000,000 Others 66,000,000 130,000,000 TOTAL: 91,900,000 190,400,000 Clean Products Demand in India 77,400,000 92,300,000 Demand Growth 14,900,000 Exports growth 83,600,000 There will also be exports from the new ME refineries (Saudi Arabia, Kuwait) Compare this to 2006 Total demand in Sub Saharan Africa = 66 million mt * Some announced capacity may never get built
Possible Impact on African Refiners The ARA wants to know if competition is fair: Are exports subsidised by domestic sales? Low cost feedstock? Low cost/free power? Disposal of low quality by-product at below cost? The WB/ARA SSA refining study should provide some answers to these questions
Challenge 2: Tightening Product Specifications
Product Specifications: AFRI Specs GASOLINE AFRI-1 AFRI-2 AFRI-3 AFRI-4 RON, min* 91 91 91 91 MON, min 81 81 81 81 Lead content** Unleaded Unlleaded Unleaded Unleaded Sulphur content, mass %, max 0.1 0.05 0.03 0.015 Benzene content, vol %, max to be reported to be reported 5 1 DIESEL AFRI-1 AFRI-2 AFRI-3 AFRI-4 Sulphur content, mass %, max 0.8 0.35 0.05 0.005 Density at 20ºC, kg/litre (min/max) 800/890 800/890 800/890 820/880 Cetane index (calculated), min 42 45 45 45 Lubricity (HFRR @ 60ºC), micron, min to be reported to be reported 460 460 *A higher grade of gasoline may be marketed if required ** 'Unleaded' means <0.013g of lead per litre
Product Specifications Specs workgroup organising meetings to develop REGIONAL plans to move up the AFRI spec scale Meeting the higher levels will require large investments Refiners need a fair, consistent playing field to attract investment Working with the WB/IMF on this is part of ARA strategy
Challenge 3: Educate policy makers about the value of a refinery
Value of a refinery The ARA believes that policy makers have been failing to take account of important factors: Industrial infrastructure Tax collector Product Quality controller Corruption reducer Lower demurrage with crude ships The ARA is addressing these issues with the WB/IMF etc
Opportunities
WB/ARA Sub Saharan Africa Refining study Refinery Sector Development study Previously carried out for Latin America and the Caribbean Integrated study on Refinery performance, product quality and health Aims to determine cost-effectiveness of upgrading African refineries to reduce urban air pollution and improve health Presentation to be given by WB later today
Financing Refining Improvements: Many members have good projects for modernising their refinery The ARA is working with the WB/IMF/IFC to: - Create fair structures for ex refinery prices so as to make project financing possible - Identify the investment needed to improve product quality through the WB/ARA study - Find ways to work with the Multinational and Regional financial institutions to raise the necessary funds IFC has agreed to finance the dismantling of lead injection facilities once ARA documents its request
Summary
Summary African Refineries face serious challenges Advantage of local refining vs. product imports has been undervalued in the past by economists Constant pressure for closure and replacement by product imports may lead to wrong answer for Africa African refineries can become much more efficient but need a consistent level playing field Working with the WB/IMF etc is key to meeting many of the challenges ARA can help by encouraging cooperation among members