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Teamwork. Refinery Modernisation. Partnership. 11th UNCTAD Africa Oil, Gas Trade & Finance Conference Nairobi, 23 rd - 25 th May 2007. NOT AN OFFICIAL UNCTAD RECORD. Overview. Global refining markets have witnessed a dramatic turnaround in the last 3-4 years Where is the demand?

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refinery modernisation

Teamwork

Refinery Modernisation

Partnership

  • 11th UNCTAD Africa Oil, Gas Trade & Finance Conference
  • Nairobi, 23rd - 25th May 2007

NOT AN OFFICIAL UNCTAD RECORD

overview
Overview
  • Global refining markets have witnessed a dramatic turnaround in the last 3-4 years
  • Where is the demand?
  • Which products?
  • What type of refineries will be needed?
  • Where does Africa fit in the global picture?
  • What does this mean for East Africa’s KPRL Mombasa refinery?
increased refinery utilisation
Increased refinery utilisation

Refining capacity is effectively full in the major world markets

refined product demand growth
Refined product demand growth

Light product demand is growing faster than residual fuels

light product demand growth
Light product demand growth

Other Americas

Europe & CIS

Asia

Africa & Middle East

US

Distillates will account for much of the global product demand growth

light and heavy product prices
Light and heavy product prices

High fuel oil yield can make refineries uneconomic

tighter product specs
Tighter product specs

Product specs in Africa are expected to follow suit

historic refining margins
Historic refining margins

Refining margins are cyclical, improving strongly in recent years

what does this mean for refiners
What does this mean for refiners?
  • Investments in new capacity
    • 50 mmtpa of new capacity in India and the Middle East by 2010
    • Proposed capacity expansion at Tema Oil Refinery, Ghana
  • Investments in new conversion capacity to improve light product yield
    • Petrotrin $800 mn upgrade to improve gasoline yields, Trinidad
    • Possible addition of a thermal gasoil unit at KPRL
  • Investments to meet of new environmental requirements
    • Sasol, Sapref, Enref and Natref refineries (new 2006 product specs), South Africa
    • Mongstad (lower emissions), Norway
key issues for african refiners
Key issues for African refiners
  • Major factors affecting refinery profitability
    • Size and operating efficiency
    • Conversion capability
    • Domestic market demand
  • Other factors
    • Product pricing formula
    • Port facilities and tankage
    • Local crude supply
    • Imports from large high complexity refineries
size and operating efficiency

6

5

5

Size and operating efficiency

African refineries (outside of RSA) are small or have low efficiency

conversion capability
Conversion capability

African refineries generally have low conversion capability

domestic market demand

Freight

$30-50/t

Import Parity – Med + $30-50/t

Export Parity – Med - $30-50/t

Domestic market demand

Strong local market important for profitability

other factors
Other factors
  • Product pricing formula
    • Often based on Platts quotations but not always consistently applied by Governments
  • Port facilities and tankage
    • Restriction on ship size and increased demurrage
    • Has cost implications for crude supply and export product pricing
  • Local crude supply
    • May not be a major economic factor
    • Refineries in Cote d’Ivoire and Congo refine Nigerian crude
  • Imports from large high complexity refineries
    • Competitive pricing of imported products
possible african refinery projects
Possible African refinery projects
  • Port Harcourt Refinery Company, Nigeria (210,000 bbl/d)
    • Partial privatisation and rehabilitation
  • Tema refinery, Ghana (100,000 bbl/d, expansion)
    • Partial privatisation and capacity expansion
  • Sonaref, Lobito Angola (200,000 bbl/d, greenfield)
    • New export refinery to process Angolan heavy acid crude oil
  • New refinery, Tanzania (200,000 bbl/d, greenfield)
    • Proposed refinery plus pipelines to Kigoma and Mwanza
  • Kenya Petroleum Refineries Limited (upgrade)
    • Possible addition of TGU to reduce fuel oil yield and enhance utilisation

Strong competition from India and the Middle East

east african petroleum market

12

1

50

4

1

KPRL

Mombasa market

30

6

Dar es Salaam market

T

Competing market

Other market

KPRL Existing refinery

T Terminal

12

5

6

30

T

East African petroleum market
  • Kenya and Tanzania are the largest markets in East Africa
  • Currently demand in Kenya is satisfied by the KPRL refinery and imports at Mombasa. Distribution through KPC pipeline
    • KPRL is looking at upgrading
    • Contracts for the upgrading and extension of the KPC pipeline have been awarded
  • Demand in Tanzania is satisfied through product imports into Dar es Salaam
  • Zambian demand is satisfied from pipeline crude imports to the Ndola refinery
  • Malawi has signed a MOU for a products pipeline from the Mozambican port of Beira
  • Total regional demand (excl Zimbabwe) is approximately 130,000 bbls/day
kenya petroleum refineries limited
Kenya Petroleum Refineries Limited
  • KPRL has a number of issues which currently hamper its profitability
    • Current lack of residue upgrading
      • Limited local fuel oil market limits capacity utilisation
      • Configuration restricts crude choice to light crude
    • New product specifications
      • Dakar Declaration
      • Limited capacity to produce unleaded gasoline
      • Unable to produce low-sulphur diesel without investment
    • Unreliable electrical power supply from grid

The proposed upgrade would address these issues and enhance profitability

kenya petroleum refineries limited1
Kenya Petroleum Refineries Limited
  • Standard Chartered was appointed as financial advisers to KPRL in September 2005
  • Bank soundings indicated a willingness of the financial markets to provide a portion of the required funding subject to the necessary equity being found
contact details
Contact details

Rob Tims

Director, Oil & Gas

Corporate Finance

Standard Chartered Bank

New London Bridge House

25 London Bridge Street

London

SE1 9TB

Tel: +44 20 7280 7645

Fax: +44 20 7280 7897

Email: [email protected],com

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