Downstream Landscape in SADC Opportunities for Namibia / Walvis Bay - Namibia Oil and Gas Conference 2019
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Downstream Landscape in SADC
Opportunities for Namibia / Walvis Bay
Swakopmund, Namibia Oil & Gas Conference, April 2019
Stanislas Drochon, Director, Africa Oil & Gas
Mobile: +33 6 45 45 53 00 – stanislas.drochon@ihsmarkit.com
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.IHS Markit activities in the Oil Markets, Midstream, Downstream group
Oil Markets, BESPOKE CONSULTING
•
Midstream, 4 •
Strategy development and investment options assessment
Market studies to support portfolio optimization and business development
• Competitive benchmarking
Downstream • Refinery economics and crude valuations
& Chemical • Transaction support, due diligence and asset valuations
SUBSCRIPTIONS
3 • Crude Oil Markets
• Midstream Oil & Natural Gas Liquids INSIGHT
• Refining & Marketing
• Global Lubricants Service
• Company Strategies & Performance
2 ANALYTICAL MODELS
• Energy Demand Model ANALYTICS
• Product Supply/Demand Model
• Crude Flow Model
• Custom model and functionality development
1 MIDSTREAM CONTENT & ASSETS
• Midstream Essentials CONTENT
2
Confidential. © 2019 IHS MarkitTM. All Rights Reserved. 2Consulting in Africa – Samples
• Logistics • Strategy
> Alternative supply routes for Botswana > NOC in Southern Africa
> Market Study for Storage Development: > Major in Africa
Mozambique, Tanzania, Djibouti, Ghana etc • Market Study for Refinery Project
> Mozambique-Zimbabwe pipeline > South Africa, South Sudan, Liberia, Nigeria
etc
• Due Diligence – Buyer’s side
• Portfolio Review
> Major’s integrated assets in South Africa
> Regional oil company
> Major’s assets in North Africa
> Major’s retail assets in Kenya • Review of Affiliate Performance
> Kenya, Tanzania, Malawi, Uganda etc
• Presentation and support to the Board
> NOC, regional oil companies • Market Entry Strategy
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.
> Zimbabwe, Zambia, Mozambique, Liberia etcRegional Trends – SADC Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
SADC: South Africa the largest market by far
Strongest growths mostly beyond SACU/Islands
White
Whiteoiloilproducts demand
products in SADC
demand in SADC SADC - White oil product demand by country 2018 and 2001-2018 CAGR
CAGR: +3%/y CAGR: +2.6%/y
1,000 1,000
900 900
2% 1% 1% 1%
3% 3%
800 800 3%
3% 3% 2.4%/y 2%/y
700 3% 2.4%/y
4%
700 8% 2.3%/y 0.6%/y 2.8%/y 2.8%/y
thousand b/d
9% 7.8%/y 3.5%/y
600
600 7.2%/y 8.8%/y
59% 9.2%/y
500
500
1.9%/y 6.2%/y
400
400
300 Namibia:
300
200 small size, limited growth
200
100
100
0
0
2001 2005 2010 2015 2018 2020 2025
Other White Products (Jet Fuel, Kerosene, LPG) Gasoline Gasoil© 2019 IHS Markit
Source: IHS Markit Source: IHS Markit © 2019 IHS Markit
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Refining production on slight decline, heavily concentrated in South Africa
White
Whiteoiloilproducts demand
products in SADC
supply in SADC SADC - White oil product supply by country - 2018
1,000 1,000
900 900
800 800
700 700
thousand b/d
600 600
500 500 2%
94% 4%
400
400
300
300
200
200
100
100
0
0 SouthAfrica Angola Zambia
2001 2005 2010 2015 2018 2020 2025
Other White Products (Jet Fuel, Kerosene, LPG) Gasoline Gasoil© 2019 IHS Markit
Source: IHS Markit Source: IHS Markit © 2019 IHS Markit
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Fast growing imports explain the growing appetite from traders for the region
South Africa turned into a large net importer since 2005 – and will remain so
White
Whiteoiloilproducts SD balance
products in SADC
SD balance in SADC South Africa - White oil product SD Balance
0 100
Moving from exporter toward large importer
-100
50
Opens opportunities to develop
alternative supply routes to hinterland
-200
thousand b/d
0
-300
-50
-400
-500 -100
-600
2001 2005 2010 2015 2018 2020 2025 -150
Source: IHS Markit Other White Products (Jet Fuel, Kerosene, LPG) Gasoline Gasoil 2001 2005 2009 2013 2017 2021 2025
© 2019 IHS Markit Source: IHS Markit © 2019 IHS Markit
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.98% of fuel imported in Walvis Bay is for the local market – ie we are not a hub or
even a corridor (yet?)
2018 White products imports by port and destination
100 80%
Transit flows to SADC
Matadi/ 90
Local flows 70%
Muanda Dar es Salaam 80
Share of SADC transit in
60%
total imports (right axis)
70
Luanda
50%
Thousand b/d
60
Lusaka Nacala
Lobito 50 40%
40
30%
Grootfontein/
Tsumeb 30
Beira 20%
20
Walvis Bay 10%
Maputo 10
0 0%
Durban Transit country Dar es Durban Luanda Beira Walvis Maputo Matadi Cape Nacala
Salaam Bay Town
Source: IHS Markit © 2019 IHS Markit
Landlocked country
Cape Town /region Existing flows
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.
Key port for import Potential flowsNamibia – What next? How to import cheaply and reliably? Is there a future for Walvis Bay as a hub / corridor? Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
If the objective is to import at the cheapest price…
• … then implementing a transparent BPS (Bulk Tanzania - BPS results - Average premium of the BPS winner
Procurement System) for 100% of volumes, managed
60
by an independent body, seems like a fair potential
solution
50
• Key stakeholders could include (non exhaustive list):
> MME, MoF, MoTI, BoN 40
> Namport, TransNamib
US$/ton
30
> NAMCOR and private OMCs
• Examples: Kenya, Tanzania or Mozambique 20
• Additional questions:
10
> Why “50%” for NAMCOR’s mandate?
0
– Economies of scale would be better with 100%... 2012 2017
Source: IHS Markit © 2019 IHS Markit
> What’s different from last decade's context?
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.What makes a key fuel hub? Is Walvis Bay a hub?
What makes a key liquid storage hub? How does that apply to Walvis Bay?
1 2 Political stability/ 3 4
Strategic location Significant storage capacity Refining center
open environment
• Small local market size, limited • Namibia a relatively stable, • Limited storage capacities and • No refinery currently (or in
upside open country competition vs other ports in the future)
• Far from hinterland markets – • Strong support for port region
only accessible by road development from port/local
authorities
• No petrochemical, refining or
sizeable bunker activity • A number of questions remain
unanswered – uncertainties
5 Significant 6 Port infrastructure and 7
Pricing center
oil flows competitive costs
• At the end of fuel flows from • Port costs competitive with rivals • No crude and product price
NWE or Middle East assessments based on WB
• Investment in new jetty
• Not along fuel trading routes • But transport cost not
competitive at all beyond port
Source: IHS Markit © 2019 IHS Markit
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Walvis Bay as a corridor – What it would take to increase transit volumes?
Operational aspects seem positive – but transport to markets is prohibitive and/or unreliable
1 Vessel Arrives at Port 2 Product Landed 3 Product Storage at Port 5 Product Exits Port
Import End
Location Market
?
• New petroleum jetty coming • Next markets beyond Namibia (Angola,
onstream soon • Free imports for now
• Reasonable storage fees Botswana, Copperbelt) are very far from
(handled by two OMCs)
WB – and would be supplied on non-
• Deep sea port (2x60DWT • Excess storage capacities competitive road/rail transport from WB
only though, vs same in Beira • Impact of NAMCOR’s
coming with MME/NAMCOR’s
Walvis and 150,000 DWT in Dar es potential mandate?
depot coming onstream (ie • Only cheap rail could make it competitive
Salaam) will have less than 5 for WB, but 1) cost? 2) reliability?
Bay • Economies of scale are
turnaround per year, or 80 • Lower cost?
• Operations smooth at the port critical:
days of reserves) • Enhance Transnamib capacities
• Limited demurrage • 100% “mandate”?
with potential secondary storage in
• BPS?
• Port cost competitive (esp vs Might reduce storage costs Grootfontein/Tsumeb?
• Include neighbors?
Mozambique) • Expand rail network to Caprivi?
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Walvis Bay is far from its key export markets – and transportation costs per unit are
among the highest… The case of Lusaka
Distance to Lusaka - km Average cost per km per cu.m - To Lusaka
2,500
NB: Rail cost per unit is 30% more
expensive in Namibia (WB-GF) than in
2,000 Angola (Lobito-Luau)
Gap
1,500 x2
Road Road Road Rail Road
1,000
Road
Road Rail
500
Rail
Pipe
0 Dar es Lobito-Luau- Beira-Lusaka Walvis Bay- Walvis Bay- Beira-Harare-
Beira Beira Dar es Walvis Bay Walvis Bay Durban Lobito Salaam- Lusaka (rail- (road) Grootfontein- Lusaka (road) Lusaka
Salaam Lusaka (road) road) Lusaka (pipeline-
Source: IHS Markit © 2019 IHS Markit Source: IHS Markit © 2019 IHS Markit (rail+road) road)
NB: Zambia is the main destination for Namport’s transit (all goods)
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.As a consequence, Walvis Bay is not competitive to supply the hinterland at current
transportation fees
Transport costs to Lusaka
Road Pipeline + secondary storage Rail + secondary storage
Rail doesn’t create competitive
advantage on price from WB
Gap
x2
Road Road Road Road Road
Road Pipeline + Rail +
Rail +
secondary secondary
secondary
storage storage
storage
Beira-Lusaka (road) Beira-Harare-Lusaka (pipeline- Dar es Salaam-Lusaka (road) Lobito-Luau-Lusaka (rail-road) Walvis Bay-Grootfontein- Walvis Bay-Lusaka (road)
Source: IHS Markit
road) Lusaka (rail+road) © 2019 IHS Markit
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.15
And even within Namibia, rail appears less competitive than road….
Cost to Supply Grootfontein from Walvis Bay
Secondary storage
Rail Road
Rail Road
Source: IHS Markit © 2019 IHS Markit
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Turning Walvis Bay as a regional corridor :
Proposed approach for a strategy definition
Objective: Approach:
1. Map the regional fuel supply chains from various ports to the
hinterland markets
Establish Walvis 2. Understand the competitiveness of Walvis Bay against these
Bay as the most competing ports from both a tangible (direct and indirect cost) and
competitive port intangible (reliability, trustworthiness, safety) perspective
in the region with
3. Identify and assess changes that could improve the competitiveness
regards to fuel
of Walvis Bay – clear, transparent cost benefit analysis
supply for the
hinterland 4. Select strategic and operational actions
5. Make strategic and operational recommendations and identify how
implementation could be financed
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Conclusion A few questions ahead… Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
A few questions ahead…
How to establish the Port of
How to ensure MME’ storage
What import scheme for Walvis Bay as the preferred
use optimization, ie avoid
which ultimate objectives? entry point for the
white elephant syndrome?
hinterland?
• Commercial vs strategic • Ensure lowest prices and • Develop an Integrated
stocks balance? How to most reliable supply for Strategy that would
optimize throughput? consumers – critical establish the Port of Walvis
• Decapitalize, bring in other objectives (?) Bay as the preferred entry
partners? • Transparency critical point for traders and oil
• Who will operate the • Fuel represents 1st item of companies supplying the
storage with NAMCOR? Namibia’s overall imports hinterland
• How will the 50% mandate • Seems like a number of
actions have to be taken
• Subsidiary question – when be organized, if confirmed?
is the last time we had a • How to avoid the “G.
shortage? experience” to happen
again?
• How to create trust among
stakeholders?
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.Thank you
–
Q&A
Confidential. © 2019 IHS MarkitTM. All Rights Reserved.20
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