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US refining industry making inroads into Africa

gaslandBuoyed by the growing production from shale oil and gas in the country, the United States (US) refining industry is increasingly pushing its refined oil products supply surplus, making its gasoline available to Africa at discount prices.

With a new wave of refinery closures in Europe stepping up amid growing competition from the US, the Middle East and Russia, Europe’s refining sector is grappling with the loss of its traditional export outlets such as Africa.

For the past five years, the boom in shale gas production in the US has led to cheaper feedstocks for its refining industry, leaving the European Union struggling to remain profitable globally, with industry players predicting around a dozen closures of refineries in the next few years in Europe

Europe’s largest refiner Total, which aims to continue, cutting its exposure to the ailing refining and petrochemical sector in Europe, has cut 23 percent of its exposure between 2006 and 2011. The French oil major aims to cut another 20 percent between 2011 and 2017.

In the past few years, European refineries have seen overcapacity, falling demand, as well as new capacity coming on stream in the Middle East and surging competition from US oil product exports hurting its competitiveness.

Fourteen refineries have closed in Europe since 2007, bringing the total in 2013 to 87, with the highest number of closures taking place in France, where refining capacity has shrunk since 2008 by 30 percent to 1.4 million barrels per day (bpd).

Refining margins have slumped to Eur15 per metric tonne ($2.78 per barrel) so far in 2014, down from Eur18/mt in 2013 and Eur36/mt in 2012.

oil-refinery

Nigeria leading the surge in import charge

In February 2014, Nigeria emerged as the largest and second-largest importer of US kerosene and jet fuel respectively, according to data released by Energy Information Administration (EIA), the statistics arm of US Department of Energy.

EIA data shows that Nigeria imported 864,000 barrels of US jet fuel in February, rising from 292 barrels in January. In November 2013, a record 1.58 million barrels were imported.

Nigeria also brought in its largest kerosene cargo – 292,000 barrels – in February, and only it’s fifth-ever kerosene cargo from the US, including one each in July, October and November.

Nigeria imported a record 2.78 million barrels of total US products in August 2013, up from a then-record 2.1 million barrels in July and 1.46 million barrels in June, data from the EIA showed. A record 1.43 million barrels of jet fuel were shipped there in August, climbing from 909,000 barrels in July and 844,000 barrels in June. Lubricants and some other products generally make up the rest of the imports.

Algeria imported a record 685,000 barrels from the US in August last year, all heating oil. Egypt averaged more than 1 million barrels a month in total products over the summer for the first time ever. Morocco pulled a record 2.2 million barrels in August, 1.54 million in July and 1.69 million in June. Togo has pulled two to three ships each month over the summer, while Mauritania had its first vessel of the year in August. Other nations in Africa also were seeing business, mostly gasoline and residual fuel.

January and February saw the two highest US kerosene export months since January 2008, when it was 887,000 barrels. Jet fuel exports, meanwhile, registered 4.06 million barrels, compared with 4.27 million in January and 3.19 million in February 2013.

Jet fuel exports have trended higher in the last five years, hitting a record 6.42 million barrels in November before dropping in the winter due to domestic demand.

Curing Africa’s refining woes

While Africa has experienced some of the largest oil demand gains globally in recent years and holding about eight percent of the world oil reserves, the continent does not produce enough refined products to meet growing demand, relying heavily on imports from US, Europe, Middle East or Far East.

Nigeria is Africa’s top crude oil producer, but imports more than 80 percent of its refined petroleum products for the servicing of its economy, because of its inadequate domestic refining capacity. Nigeria’s four refineries with a combined capacity of about 445,000 bpd are undergoing scheduled turn around maintenance to improve their reliability.

The government plans to boost utilisation rates for the refineries to about 90 percent of their installed capacity. The four refineries operated at an average of 31.1 percent of capacity in 2012, according to recent data from the Central Bank of Nigeria.

In a forecast by International Energy Agency (IEA), demand for refined products across the entire Africa continent is likely to rise by up by 40 percent to 4.3million barrels a day in 2020, from 3 million barrels a day in 2008.

Industry analysts have said that by exporting most of its oil to be refined elsewhere, including for eventual domestic consumption, the continent has long missed out on a huge opportunity for economic transformation.

Ever since Egypt’s El Nasr refinery came on-stream in 1913, a total of 55 refineries have been built in Africa. At present, only 40 are operational; 21 of them are in North Africa while 19 are in sub-Saharan Africa.

Aliko Dangote, Africa’s richest man and business mogul, is building a $9 billion refinery/petrochemical/fertiliser complex in Nigeria. The refinery will initially have a capacity of 400,000 bpd, doubling Nigeria’s refining capacity as well as cut imports of refined petroleum.

Kenya plans to almost double the 35,000-bpd capacity of its Mombasa refinery, currently the only major crude oil refinery in East Africa. Uganda plans to add another refinery to be constructed in collaboration with Kenya, Rwanda and South Sudan that would handle 60,000 bpd.

In Angola, Sonangol has started work on a new 200,000 bpd refinery. Cameroon’s Limbe refinery is currently undergoing extensive improvement works that will enable it to double its capacity by 2016-17. There is plan to expand Senegal’s 27,000 bpd Dakar plant owned by Societe Africaine de Raffinage, as well as the 64,000 bpd plant in Abidjan, in Cote d’Ivoire and a new refinery could be built in Gabon.

Global refining throughput to rise by 1mbpd in 2014

Global refining throughput levels for 2014 will be one million bpd above 2013 levels, largely due to increased capacity in China and the Middle East, says research and consulting firm GlobalData.

The start-up of new refining capacity in the Middle East will also result in higher runs in 2014, with refining throughput levels approximately 500 mbpd greater than 2013. Saudi Arabia’s 400 mbpd Jubail refinery is ramping up to full capacity and its 400 mbpd Yanbu refinery will become operational in September 2014, while the UAE’s 420 mbpd Ruwais refinery is set to open later in Q4 2014.

This increase in Middle Eastern refining capacity will have a profound impact on global product trade flows, says GlobalData.

“The increase in gasoline volumes will reduce 2014 gasoline imports into the Middle East by approximately 100 mbd from both Europe and India. Gasoline volumes from India will alternatively be sold intra-Asia, but European gasoline will have a tough time finding a home and likely result in lower refining runs. This will exacerbate the pressure on refining activities in Europe,” said Carmine Rositano, GlobalData’s managing analyst covering downstream oil and gas.

FEMI AS/  http://businessdayonline.com

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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