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Companies in Africa are eying investments in refinery upgrades and building new plants to meet more stringent specifications that are gradually being enforced throughout the continent and to avoid closures, according to panelists at the ARDA conference in Cape Town March 13-17.

A number of refineries have closed in recent years, including Zambia’s Indeni and South Africa’s Engen. Meanwhile South Africa’s Sapref and PetroSA have been mothballed while others remain idle, such as Ghana’s Tema and Cameroon’s Limbe.

Indeni halted in September 2020 and the closure was announced in December 2021. Engen closed in 2020 and is being converted into a terminal. Sapref was mothballed in 2022, and while the owners had aimed to find a buyer, a subsequent flooding of the site has made such option very unlikely, according to panelists.

Part of the reason cited for the closures was more stringent specifications.

In North Africa, Algeria is building the Hassi Messaoud refinery, while Egypt is carrying out upgrades at Assiut, El Nasr and Suez and building a 45,000 b/d CDU at Midor, panelists said.

There was a focus on the expected startup of Nigeria’s mega Dangote refinery. In Nigeria, NNPC’s three refineries — Kaduna, Port Harcourt and Warri — have all started repairs. The old Port Harcourt refinery was expected to come back onstream in the second quarter.

Meanwhile, Sonangol has been progressing with the construction of three greenfield refineries in Angola — Cabinda, Lobito and Soyo — and has also been considering an expansion of its Luanda refinery. Once the new refineries are commissioned, Sonangol expects to operate at around 425,000 b/d refining capacity.

Ghana’s new refinery, being built by the Sentuo Group, was expected to come online later this year or early 2024.

Uganda is expected to make the final investment decision on its Albertine Graben refinery in June.

Senegal’s SAR is looking at the expansion of its refinery, and Ivory Coast’s SIR is investing in expanding and also building new units which will help it improve the quality of its products.

In Gabon, Sogara is considering the construction of a hydrocracker to meet Africa’s objective of moving to cleaner fuel that complies with both AFRI 6 and Euro-V emission standards.

According to estimates by consultancy CITAC, the necessary refinery investments amount to around $15.7 billion.

Separately, as Africa’s energy demand and population grow, the continent is looking to ensure its energy security but also combine it with clean energy projects as the increased energy demand coincides with global energy transition efforts, according to delegates at the ARDA conference.

Energy demand is expected to grow by 45%-50% between 2020 and 2040, while the continent’s population will increase from 1.5 billion to 2.5 billion in 2050, data presented by delegates indicated.

The message conveyed by delegates was that growing demand for energy must be met with cleaner fuels. However, energy security was highlighted as the short-term priority.

Meanwhile, the region’s refinery capacity and utilization remain low, with total capacity estimated at around 2 million b/d and utilization slightly above 60% in 2021, data presented at the conference showed.

In other news, TotalEnergies has signed a 20-year, 260-MW renewable power purchase agreement with Sasol South Africa and Air Liquide Large Industries South Africa, the French energy company said. In April 2021, Air Liquide and Sasol launched a joint initiative to procure 900 MW of renewable energy for their operations in Secunda.

“TotalEnergies will develop a 120 MW solar plant and a 140 MW windfarm in the Northern Cape province to supply around 850 GWh/year of green electricity to Sasol’s Secunda site, located 700 km further northeast, where Air Liquide operates the biggest oxygen production site in the world,” it said.

The two projects are expected to be operational in 2025.

S&P Global by Elza Turner, March 22, 2023

Saudi Aramco unexpectedly increased its dividend and said it would hike spending as it looks to deploy an avalanche of cash generated by last year’s surge in oil and gas prices.

The world’s biggest energy company made net income for the full year of $161 billion, the most since it listed and up 46% from 2021. Its performance was bolstered by Russia’s invasion of Ukraine roiling oil markets and the OPEC+ alliance raising production.

Aramco boosted its dividend — a crucial source of funding for the Saudi Arabian government — to $19.5 billion for the final quarter, up 4% from the previous three-month period.

US and European peers such as Chevron Corp. and Shell Plc also reported blowout earnings and are returning billions of dollars to shareholders through larger dividends and buybacks. Aramco, until now, has instead focused on using its extra cash to increase output.

Crude prices have fallen from $125 a barrel since the middle of 2022, with Brent dropping another 3.6% this year to below $83 a barrel. That’s been caused in large part by the US Federal Reserve staying hawkish on inflation and investors no longer anticipating interest rates will be on a clear downward path by the second half of 2023.

The company’s adjusted profit weakened to around $31 billion between October and December, according to Bloomberg estimates, down from $42 billion in the third quarter. Aramco will release a full financial statement on Monday.

Sabic, a chemicals firm controlled by Aramco, saw income slump in late 2022 as a global economic slowdown weighed on consumption of everything from plastics to building materials.

China bounce

Many traders still think oil will climb later this year, perhaps back to $100 a barrel, as China’s economy recovers with the ending of coronavirus lockdowns.

Demand in China and India, two of Aramco’s main markets, is robust, Chief Executive Officer Amin Nasser said to reporters on Sunday. Oil consumption will probably hit a record of 102 million barrels a day by the end of 2023, he said.

“Europe might have been impacted a little bit because of the conflict between Russia and Ukraine and economic headwinds,” he said. “But in the rest of the world, where most of our supplies go to, we are seeing pick up in demand.”

Aramco reiterated there’s too little investment globally in oil and gas production and warned that a tight market could cause prices to jump.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices,” Nasser said in a company statement.

Saudi Arabia has criticized Western governments and energy firms for trying to transition to clean energy too quickly. Aramco, in contrast, is spending billions of dollars to raise its daily oil capacity to 13 million barrels by 2027 from 12 million, and gas output by more than 50% this decade.

Aramco spent $37.6 billion on capital projects in 2022 and will increase the figure to between $45 billion and $55 billion this year, it said. In addition to oil, its investing heavily in cleaner fuels including hydrogen.

The full year dividend of $75.8 billion — the world’s largest for a public company — was easily covered by free cash flow, which soared to almost $149 billion.

“We’re aiming to sustain it at this level and grow it through the years,” Chief Financial Officer Ziad Al-Murshed said of the dividend.

Aramco will also issue one bonus share for every 10 shares owned.

The gearing ratio, a measure of net debt to equity, fell further into negative territory as the firm’s finances improved. It dropped to -7.9% from -4.1% at the end of September.

Crude production averaged 10.5 million barrels a day in 2022, the highest level ever for the kingdom. That came as the Organization of the Petroleum Exporting Countries and its partners — a 23-nation group led by Saudi Arabia and Russia — opted to pump more following deep supply cuts in 2020 as Covid-19 battered the oil market.

OPEC+ staying put

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, has indicated the alliance will leave its quotas unchanged for at least the rest of the year.

Aramco, based in Dhahran in eastern Saudi Arabia, carried out an initial public offering in 2019. The government still owns around 98% of the stock, which was unchanged on Sunday in Riyadh at 32.80 riyals.

Aramco has a market value of $1.9 trillion, second only to Apple Inc.

By Energy Voice, March 22, 2023

Petroleum products are processed from crude oil and other liquids made from fossil fuels and are used by people for a variety of things.

Biofuels are utilized similarly to petroleum products, most commonly in blends with gasoline and diesel.

The main significant energy source for Pakistan’s yearly total energy consumption has historically been petroleum. Petroleum-based products are used to power cars, heat buildings, and generate energy. Plastics, polyurethane, solvents, and countless more intermediate and finished commodities are produced by the petrochemical industry, which is a part of the industrial sector.

Pakistan has 19 million tons (MT) annual demand for petroleum products, although it meets roughly half of that need through local crude production and refinery processing of imported crude. Transportation, energy, and industry are the three major users that rely on petroleum products. Petroleum products are used for transportation 59%, power 32%, and industry 8%. Due to their commercial links and the ability to delay payments, Pakistan frequently purchases from Saudia, Qatar & Gulf Countries, although now purchase from Russia is in files, too. 

Another issue in Pakistan is the low production capacity of the refineries, which significantly affects the country’s oil exports. Almost 50-40 % of the total capacity is being utilized by all refineries. By building new oil refineries and increasing the capacity of the ones that already exist, Pakistan may enhance its exports.

By providing incentives to investors and reducing the existing high tariffs on refining equipment, this process may be sped up. In Pakistan, there are five refineries that are in operation: Pak Arab Refinery Limited (MCR), Attock Refinery Limited (ARL), Byco Petroleum Pakistan Ltd (Byco), National Refinery Limited (NRL), and Pakistan Refinery Limited (PRL). These refineries have an approximate 19.37 million tons capacity overall. Domestic refineries generate around 11.59 MT, importing the remaining amount (8.09 million tons).

Because of this, some refineries are only operating at 40% of their actual capacity. It is worth mentioning that due to the superior profit margins enjoyed by existing refineries that use hydrocracking technology, the most recent deep conversion plant is unable to compete. If hydrocracking petroleum refineries are permitted in Pakistan, the technique is abandoned internationally and Pakistan may face several consequences.

It is important to keep in mind that oil is highly combustible and that caution must be exercised while keeping flammable liquids in storage, especially. The Dangerous Substances and Explosive Atmospheres Regulations 2002 (DSEAR) are in place to prevent a fire or explosion at work and define a flammable liquid as one with a flashpoint of 60°C.

Regardless of the quantity of oil stored, a risk assessment is required under DSEAR to determine whether existing control measures are sufficient to manage the risk of fire or explosion or whether additional controls or precautions are necessary.

In addition to day-to-day activities in the laboratory, it is necessary to assess non-routine activities, such as maintenance work where there is often a higher potential for fire and explosion incidents to occur.

The Health and Safety Executive (HSE) guidance notes that often fires or explosions occur when vapours or liquids are released from a controlled environment to areas where there may be an ignition source, with incidents commonly arising during transfer operations including movement from storage facilities within premises and dealing with spillages. Even the most proactive safety program cannot cover every exposure. The spill and emergency planning should include steps for responding to every potential hazard.

The inspection and maintenance processes are the first line of defence in preventing equipment condition-related accidents. How often to inspect depends on the age and condition of the equipment, as well as the potential threat to life and property should a leak or sudden release occur. Any defects should be addressed immediately.

Both visual and nondestructive testing of equipment can assess the integrity of the tanks and other equipment. Older equipment should be inspected more frequently and rigorously. Inspect tank exteriors and interiors for structural integrity. Use a detailed recordkeeping system that includes useful life forecasts to stay ahead of any potential issues.

Any equipment with a predictable lifespan should be replaced according to the manufacturer’s recommendations. Regular preventative maintenance should be done on a strict schedule, including lubricating mechanicals and checking valves, gaskets, and hoses for signs of degradation.

Chart corrosion rates for metal parts, and replace them when they reach a predetermined level. Keep oil/water separators maintained to ensure the ability to treat contaminated stormwater and help contain and prevent releases to the environment.

Bulk petroleum storage facilities come with inherent operational risks. If your operations are not properly managed, the result could be devastating to your facilities, your employees, your community, and your bottom line.

Fortunately, a comprehensive management plan that addresses hazards, controls, prevention, emergency planning, and employee training can go a long way toward mitigating many of these risks.

By establishing rigorous inspection and maintenance procedures, training employees in equipment use and incident response, and being prepared for any potential event, the storage facilities can do much to decrease losses and keep employees and communities safe.

To avoid any serious risk or to prevent any disaster, OGRA should ensure strict compliance with the safety standards for all storage belonging to various Oil Marketing Companies (OMCs).

Proper 3^rd Party Safety Inspection should be ensured and no favouritism or inclination should be shown by OGRA towards any particular OMC. All such depots that are non-compliant with safety standards,  should immediately be sized to operate and should allow operating only after proper 3^rd Party Inspection.

Further to strengthen safety importance & compliance, all retail outlets allowed on the basis of non-safety compliant depots should immediately be seized.

Germany continues to save gas. In the past week, gas consumption was 18.2 percent below the average consumption for the years 2018 to 2021, as the Federal Network Agency reported today.

The slightly higher average temperatures may also have helped: They were 1.1 degrees above the average of the four reference years.

Industry used 20 percent less, households and businesses 16 percent less. Authority President Klaus Müller described the decline as “relevant”. “Every saving is easy on the wallet and helps the climate

As is usual in winter, the filling levels in German gas storage facilities are currently falling. According to preliminary data, the total filling level on Wednesday morning was 69.5 percent.

That was almost 0.6 percentage points less than the day before, according to data from the European gas storage association GIE. For comparison: a year earlier the fill level was 28.6 percent.

Level in the EU at around 61.1 percent

The largest German storage facility in Rehden, Lower Saxony, was 84.6 percent full on Tuesday. Across the EU, the fill level was around 61.1 percent. That was 0.5 percentage points less than the day before.

The storage facilities compensate for fluctuations in gas consumption and thus form a buffer system for the market. On the morning of November 14, a fill level of 100 percent was recorded.

It should be noted that in addition to gas withdrawal from the storage facilities, gas continues to flow to Germany through pipeline imports.

According to the Federal Network Agency, Germany received natural gas from Norway, the Netherlands, Belgium and France on Tuesday. Gas now also flows into the German transmission network via new LNG terminals on the German coast.

By INDO & NY, March 7, 2023

U.S. oil prices fell below $70 for the first time in over a year on growing evidence of weak oil demand and fears that the banking sector’s troubles will drag down the global economy. 

West Texas Intermediate crude futures, the U.S. benchmark, fell 5.6% to $67.31 per barrel on Wednesday afternoon. WTI hasn’t been this cheap since 2021.

BARRON’S by Avi Salzman, March 15, 2023

Fitch Ratings-Shanghai/Hong Kong-08 March 2023: Chinese oil refineries’ margins are likely to recover in 2023 on a smoother cost pass-through, higher exports and a domestic demand rebound, Fitch Ratings says.

National oil companies’ (NOCs) gas import losses may also narrow as import costs decline.

Domestic fuel consumption is set to recover in 2023, especially in gasoline and jet fuel due to a low base and increase in road and air travel, partially offset by rising electric-vehicle penetration.

Diesel demand growth will taper from 2022’s high base and hinges on the industrial demand recovery, which we expect to be more modest than the consumption recovery.

Fitch also expects higher exports to support NOCs’ refining margins. A generous first batch of China’s 2023 export quota will allow refineries to earn higher export margins after year-on-year crack spreads widened to a record high despite extreme volatility.

Russian refined oil products’ export ban, China’s reopening and global refinery shutdowns should support crack spreads in 2023, though export demand could be dampened by global recessionary risks.

NOCs incurred gas import losses in 2022 as higher costs could not be fully passed through. However, we expect gas import losses to narrow in 2023 on potential import cost declines as crude prices fall and the gas shortage eases in Europe.

Fitch expects downstream-focused China Petroleum & Chemical Corporation’s (Sinopec, A+/Stable, Standalone Credit Profile (SCP): a-) financial profile to strengthen in 2023. Steady upstream performance mitigated weak downstream performance in 2022.

We expect further improvement in EBITDA net leverage for upstream-focused PetroChina Company Limited (A+/Stable, SCP: aa-) and its parent, China National Petroleum Corporation (A+/Stable, SCP: aa-), and CNOOC Limited (A+/Stable, SCP: a).

By FitchRatings, March 15, 2023

US crude exports have reached a record high as trade flows have shifted following the Russian invasion of Ukraine, but more midstream infrastructure will be needed to push exports higher, panelists at CERAWeek by S&P Global said March 7.

A year removed from the Russian invasion, Europe continues to look for replacement barrels for Russian supply with a significant portion traveling from North America.

As a result, oil flows across the globe have reshuffled.

“Traditional alliances are shifting,” said Sean Strawbridge, CEO of the Port of Corpus Christi. Energy is going to play a major role in the reconfiguration of relations with Russia, China and even Saudi Arabia as they moved away from Western alliances, he added.

US exports of crude climbed to a record high of 5.629 million b/d for the week ended Feb. 24, up nearly 2 million b/d from the same time last year, according to the most recent weekly data from the US Energy Information Administration.

Cory Prologo, head of North American trading at Trafigura, said export capacity would depend on international demand and energy transition.

However, he warned that export capacity could be stunted by a lack of investment in supporting infrastructure and by lengthy regulatory requirements.

For instance, Strawbridge noted, it currently takes 240 days on average for to permit an offshore loading terminal capable of handling VLCCs.

“Most 404 permits average about 240 days in this country,” he said, in reference to Section 404 of the Clean Water Act that requires permitting for any work, including construction and dredging in navigable waters.

“That is also endemic of why we need more regulatory reform and more accountability from these federal agencies who are responsible for issuing these permits,” he said.

Frederick Forthuber, president of Oxy Energy Services, said the industry might need to expand pipelines to the US Gulf Coast in order to feed an increase in crude exports, with the company’s current exports at 4 million b/d.

Since March 2, six VLCC’s have been booked from the USGC to Asia and two to Europe, S&P Global Commodity Insights data shows. As foreign demand for US crude grows, there haven’t been enough VLCCs available to curtail higher freight levels.

Shipowners have gotten ahead of the demand, with each deal being settled higher than the previous one. Additionally, firmer levels at the US Gulf Coast have caused ballasting as ships prefer the region over others to take advantage of higher rates.

VLCC rates on the USGC to China route were last assessed by Platts at $37.04/mt on March 6. While that was down from a recent peak of $54.63/mt on Nov. 18, it was up from around $18/mt at the beginning of 2022. Platts is a unit of S&P Global.

Enbridge said on March 1 it will move ahead with the construction of an Enbridge Houston Oil Terminal in Texas.

The terminal will provide export opportunities through the Seaway docks at Freeport and Texas City, as well as future access to Enterprise Products Partner Sea Port Oil Terminal.

The larger aim is to bring their reliable production of crude to global markets and meeting growing demand, Executive Vice President Colin Gruending said on the sidelines. “Canadian heavy crude is needed to fill the equation,” he said.

US crude production is expected to grow, even if at a slower pace. S&P Global expects US crude output to grow by 931,000 b/d in 2023. Growth will come primarily from the Permian Basin.

Forecasts by S&P Global show a steady build in domestic crude production in the US and Canada, with this year projected to surpass pre-pandemic production levels in the US. From 2023, the US is expected to see a 794,000 b/d growth in production by 2030.

Canadian production exceeded pre-pandemic levels in 2022 and is projected to grow 469,000 b/d in the same timeframe.

S&P Global by Binish Azhar, March 14, 2023

A year on from Russia’s initial invasion of Ukraine, Russian fossil fuel exports are still flowing to various nations around the world.

As Visual Capitalist’s Niccolo Conte details below, according to estimates from the Centre for Research on Energy and Clean Air (CREA), since the invasion started about a year ago, Russia has made more than $315 billion in revenue from fossil fuel exports around the world, with nearly half ($149 billion) coming from EU nations.

This graphic uses data from the CREA to visualize the countries that have bought the most Russian fossil fuels since the invasion, showcasing the billions in revenue Russia has made from these exports.

As one might expect, China has been the top buyer of Russian fossil fuels since the start of the invasion. Russia’s neighbor and informal ally has primarily imported crude oil, which has made up more than 80% of its imports totaling more than $55 billion since the start of the invasion.

The EU’s largest economy, Germany, is the second-largest importer of Russian fossil fuels, largely due to its natural gas imports worth more than $12 billion alone.

Turkey, a member of NATO but not of the EU, closely follows Germany as the third-largest importer of Russian fossil fuels since the invasion.

The country is likely to overtake Germany soon, as not being part of the EU means it isn’t affected by the bloc’s Russian import bans put in place over the last year.

Although more than half of the top 20 fossil fuel importing nations are from the EU, nations from the bloc and the rest of Europe have been curtailing their imports as bans and price caps on Russian coal imports, crude oil seaborne shipments, and petroleum product imports have come into effect.

Russia’s Declining Fossil Fuel Revenues

The EU’s bans and price caps have resulted in a decline of daily fossil fuel revenues from the bloc of nearly 85%, falling from their March 2022 peak of $774 million per day to $119 million as of February 22nd, 2023.

Although India has stepped up its fossil fuel imports in the meantime, from $3 million daily on the day of the invasion to $81 million per day as of February 22nd of this year, this increase doesn’t come close to making up the $655 million hole left by EU nations’ reduction in imports.

Similarly, even if African nations have doubled their Russian fuel imports since December of last year, Russian seaborne oil product exports have still declined by 21% overall since January according to S&P Global.

Other Factors Impacting Revenues

Overall, from their peak on March 24th of around $1.17 billion in daily revenue, Russian fossil fuel revenues have declined by more than 50% to just $560 million daily.

Along with the EU’s reductions in purchases, a key contributing factor has been the decline in Russian crude oil’s price, which has also declined by nearly 50% since the invasion, from $99 a barrel to $50 a barrel today.

Whether these declines will continue is yet to be determined. That said, the EU’s 10th set of sanctions, announced on February 25th, ban the import of bitumen, related materials like asphalt, synthetic rubbers, and carbon blacks and are estimated to reduce overall Russian export revenues by almost $1.4 billion.

By OilPrice.com, March 14, 2023