Africa Rides Wave of Oil Demand Growth that Exceeds Marginal Global Growth

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--At a time when global oil demand is inexorably moving east and North American shale oil production is skewing previously set market and price trends, there is a question mark over the medium-term output capacity match with demand from oil refineries, as the pipeline for new projects in the sector continues to fill.

Depending whether projects have achieved financial closure, are due to be commissioned, or have been officially "mulled," Africa's refinery project pipeline is looking increasingly busy. This coincides with the release of the International Energy Agency's (IEA) latest medium-term oil market report, which says that over the next five years, demand for oil in Africa will rise steeply and will grow faster than in any other region of the world.

African consumption of gasoline and diesel is forecast to grow 4.5% annually through 2018, and jet fuel and kerosene demand could see a growth of 3.9%. The rest of the world's oil use will grow 1.2% in the period, against 4% overall in Africa. The continent could have up to 18 projects in or near the pipeline.

Iran's Tehran Times reports that Iran will set up six oil refineries in Africa. This was announced this week by Hasan Khosrojerdi, the head of the Iranian Oil, Gas and Petrochemical Products Exporters Union. Memoranda of understanding are reported to have been signed with six African countries, and measures have been taken for finding appropriate sites to build the refineries. Khosrojerdi said that the refineries are projected to have a capacity of 20,000 barrels a day.

Iranian news agency Fars reported an informed source as saying that Iran had reached agreements with Algeria, Angola and South Africa to build small refineries in those countries. The same source said that Iran had been holding talks with Pakistan to establish refineries at two sites and that a deal was close to being signed. Not much corroboration on these projects has come from the putative host countries but this could be as a result of the dealmakers trying to fly below the anti-Iranian sanctions radar.

On a visit to the U.K., Algerian Oil Minister Youcef Yousfi said that the country plans to double its refining capacity by building six new refineries, which would raise the national capacity to 60 million tons annually. Algeria's current throughput of 30 million tons provides about 15 million tons for the domestic market.

The minister said that construction on the projects would begin at the end of this year. He added that there are plans to invest $100 billion in upstream oil and gas exploration through 2020.

There are also a number of other African refinery projects that have been off and on for years, but may now benefit from the changing profile of the global oil sector.

Nigeria has a major refinery project in the pipeline; for more information, see April 19, 2013, article - Africa's Richest Man to Take on Challenge of $8 Billion Nigerian Refinery. Uganda has settled for a medium-size plant; for more information, see April 17, 2013, article - Uganda Refinery Project Opts to Go Smaller, Adds Export Pipeline. South Africa's PetroSA is still developing a major project at the Coega trade zone; for more information, see April 3, 2013, article - South Africa's 360,000 Barrel-per-Day Refinery Project with Sinopec Nearing Closure.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.