Analysis by Poten & Partners
Clean Petroleum Product Fixtures into Sub-Saharan Africa
According to Poten & Partners, over the last five years, the refined product trades into subSaharan Africa have increased dramatically. Based on the outlook for product demand relative to projections for African refinery output, the outlook for the next five years is also quite promising, driven mostly by the traditional powerhouses of South Africa and Nigeria. They are the largest African economies by far together they account for more than half of the sub-Saharan economy. To put matters in perspective (and highlighting the continents growth potential), the GDP of all sub-Saharan countries combined (940 million people) is still significantly below the economic output of Germany (82 million people) in purchasing power parity terms.
Given the port and terminal restrictions of most of the countries in Africa, MRs, Handys and smaller product tankers are the vessels of choice to distribute the product around the continent. However, larger vessels are also utilized, mostly for lightering purposes. For example, fully laden Panamax sized product tankers (LR1s) are regularly taken to Lagos (Nigeria) from where small 15 25,000 dwt tankers shuttle the product to other Nigerian ports like Warri and Port Harcourt.
Most of the products imported into Africa are gasoline and diesel fuel. Most of the imports into Western Africa come from Europe and, more recently, from the United States. East and South Africa import most of their shortfall from the Middle East or India. South Africa is fairly selfsufficient, with modern and efficient local refineries supplying about two-thirds of the countrys needs.
Refining capacity in Africa is very limited (around 2.2 million barrels per day) and has not changed much over the last 10 years. Most of the refineries in Africa are small (< 50,000 b/d), old and unsophisticated. They are in relatively poor condition due to years of under-investment and neglect and run at extremely low utilization rates.
Some refinery expansions and new capacity is planned, but little is expected to come on stream within the next five years. Three new refineries are in the pipeline in Uganda, Angola and Nigeria. The proposed facility in Uganda (the first refinery in the country) will be built by a Russian firm and the estimated construction cost, including storage terminals, a product pipeline and other related infrastructure is about $3 billion, a tidy sum for a small 60,000 b/d refinery. The construction on the new Sonarefrefinery in Angola already started in 2012, but the 120,000 b/d facility is not expected to come online until at the earliest 2017-2018. The start date has already been pushed back several times. In Nigeria, Africas richest man, Aliko Dangote is behind the project to build a large new refinery near Lagos. This refinery has a planned capacity of 400,000 b/d and will be part of a complex that also includes a petrochemical and fertilizer plant.
Driven by Africas population growth, the IEA forecasts that product demand will increase by a 3.3% per annum from 2014 through 2020 and so will its import requirements. Total net product imports could rise to more than 2.0 million barrels per day before the end of the decade.
Steady growth in African product imports will continue to provide support to the medium and long range product tanker segments.
Source: Poten
