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The Future of Africa’s Refining in a Liberalized Economy

By Jamal M Ba-AmerBy Jamal M Ba-AmerSAMIR Deputy SAMIR Deputy General Manager of General Manager of

DevelopmentDevelopment

NOT AN OFFICIAL UNCTAD RECORD

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The International Context

Several African countries have: Emergent economies Low level of market liberalization

Business environment sufficiently attractive for private investments

World Bank promotes liberalization and transparency as pillars for development

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The Industry Context

Lead phase out is finally on the agenda Globalisation of car manufacturing will

eventually bring clean fuels in Africa Already happening in Morocco

Difficult for small refineries to remain financially viable in liberalized markets Below 50,000 B/D it is difficult to justify even

small investment in clean fuels projects Some countries have privatised

refineries, other are in the process of doing it

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Africa is a very low weight player

0

5

10

15

20

25

Million B

/D

Far East &Oceania

USA &Canada

Europe LatinAmerica

FSU MiddleEast

Africa

Refining Capacity Products Demand

4% of world capacity

3% of world demand

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Does every country need a refinery?

0

200

400

600

800

Thousa

nd B

/D

Current Oil Products Demand By Country

Egypt

Algeria

Libya

Nigeria

Morocco

• Security of supply is better provided by domestic refineries if demand is sufficient, but…

•… most countries do not have sufficient oil demand to justify having an internationally competitive refinery

Morocco is the largest net ‘Energy importer’ in Africa

Size to be internationally competitive

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Energy-wise, there are several Africas…

Oil rich North Africa trades with the Mediterranean and is almost isolated from Sub-Saharan Africa

In Sub-Saharan Africa: West Africa is oil-rich but little

developed East Africa is oil-poor and little

developed South Africa is the most developed

economy

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North-Africa Refining Capacity

0

50

100

150

200

250

300

350

Cru

de

Ca

pa

cit

y, k

B/D

0

20

40

60

80

100

FC

C E

qu

iva

len

t, %

of

Cru

de

Ca

pa

cit

y

Crude Capacity, B/D

FCC Equivalent, %

Competitive CIF Refinery

Competitive FOB Refinery

Export Refineries

• 243,000 B/D of capacity is at refineries smaller than 60,000 B/D

• The 6 largest refineries are all simple hydroskimmers

• Viability of the industry is a strategic issue mainly for Viability of the industry is a strategic issue mainly for MoroccoMorocco

MOH

SK

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East-Africa Refining Capacity

0

20

40

60

80

100

Cru

de

Ca

pa

cit

y, k

B/D

0

20

40

60

80

100

FC

C E

qu

iva

len

t, %

of

Cru

de

Ca

pa

cit

y

Crude Capacity, B/D

FCC Equivalent, %

• 9 refineries out of 11 may find it difficult to compete in a liberalized market

• The remaining two are simple hydroskimmers

Karthoum-Upgraded to enable processing of domestic crude

Mombasa

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South-Africa Refining Capacity

0

20

40

60

80

100

120

140

160

180

200

Cru

de

Ca

pa

cit

y, k

B/D

0

20

40

60

80

100

FC

C E

qu

iva

len

t, %

of

Cru

de

Ca

pa

cit

y

Crude Capacity, B/D

FCC Equivalent, %

• Size and complexity are comparable to Western refineries

• Superior economy of scale would justify further investment

• Best positioned to be key regional suppliers in a liberalized market

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West-Africa Refining Capacity

0

20

40

60

80

100

120

140

160

180

200

Cru

de

Ca

pa

cit

y, k

B/D

0

20

40

60

80

100

FC

C E

qu

iva

len

t, %

of

Cru

de

Ca

pa

cit

y

Crude Capacity, B/D

FCC Equivalent, %

• Three Nigerian refineries and the Abidjan refinery have size and configuration to be competitive. Nigeria is key to Nigeria is key to the region…the region…

•….But the historical performance of the Nigerian refineries has not been satisfactory.

Nigerian Refineries

Abidjan

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How much capacity is at refineries with a competitive size?

North Africa1377 kB/ D7% FCC

West Africa460 kB/ D14% FCC

East Africa140 kB/ D0% FCC

South Africa474 kB/ D31% FCC

• In Sub Saharan Africa only 1.5 million B/D has competitive size (less than any of the “Big-Four” EU countries taken individually)

• Size is not everything. Significant effort (capital and know-how) required to make capacity operable and profitable

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Does this capacity meet oil demand?

0

100

200

300

400

500

600

700

800

Thousa

nd B

/D

Egypt Libya Tunisia Algeria Morocco

North Africa

Existing Crude CapacityAt Competitively Sized RefineriesCurrent Oil Products Demand

• Morocco has the least oil production and needs to maintain competitive its only internationally-sized refinery

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What about Sub-Saharan Africa?

0

100

200

300

400

500

600

700

800

Thousa

nd B

/D

East Africa West Africa South Africa

Existing Crude Capacity

At Competitively Sized Refineries

Current Oil Products Demand

• West Africa would be served by a revival of the Nigerian refineries. Otherwise the region will remain a large importer of products.

• The South African industry has surplus to serve East Africa

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Conclusions – North Africa

North Africa is oil rich and has excess refining capacity

Refinery complexity is generally low Some refineries may not be viable in

liberalized markets but this does not generally pose a strategic

problem Morocco is a special case

little crude production. The country must rely on a ‘Western-like’ refining industry

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Conclusions – Sub Saharan Africa

Most countries do not have an internationally competitive refining industry

Capacity at competitively sized refinery would be sufficient, but performance has not been satisfactory

Key to the region is the successful privatization of the Nigerian refineries

East Africa lacks competitive capacity South Africa has the most competitive industry.

Well positioned to be a strategic supplier for others Most countries will need to focus on secure product

imports, rather than supporting a domestic refinery

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The Refining industry in Morocco

Morocco has firm commitments towards liberalization

Adoption of Clean Fuels specifications (similar to EU)

There are two refineries, of which Mohammedia has an internationally competitive size

Samir is working at an important upgrading project for the Mohammedia refineryThe project would give Morocco the only

internationally competitive refining industry in the continent outside of South Africa and crude

producing countries

REFORMING 1

REFORMING 2

NAPHTA+GAZ

KERO HDS

GASOIL HDS

COMPLEXE HUILES

DS

V

ES

SE

NC

ES

GA

SO

ILF

UE

L O

IL

Fuel gas

GPL

Jet/Kero

Huiles de base

Bitumes

C4Fuel gas

Essence légère

Reformat

LPGEssence lourde Unité H2

HYDROCRACKER

DS

V

VIS

BR

EA

KE

R

H2 riche gas

Naphtha

NaphthaGas oïl

ResidueFuel gas

Gas oïl

KERO MEROX

H2

8250

2600 1700

68

207

130

Naphtha

en Kt/A

Nouvelles unités

1400

561

3

2

1

DIS

TIL

LAT

ION

2500

Sulfure Unit

100

230

810

430

420

3925

1410

150

AMINE

Demin Water 200M3/h

S W S

SAMIR Upgrade Project Configuration

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Thank you for your kind Attention