Certain strong market forces are set to drive South Africa’s petrochemicals, gas and oil sector in the third quarter of 2012. 25° in Africa gives an overview.
Trends in the domestic petrochemicals market are likely to lead to an emphasis on imports over the coming quarters, as feedstock supply problems constrain production growth, according to Business Monitor International’s (BMI) South Africa Petrochemicals Report Q3 2012.
Looking ahead, the petrochemicals industry should navigate risks and maximise opportunities. According to the BMI report, key challenges in the South African petrochemicals sector include labour, power supply and a weakening external environment. However, the report states that opportunities for long-term growth emanate from the automotive and construction sectors – both locally and elsewhere in sub-Saharan Africa. “A Chinese slowdown and the Eurozone crisis could also influence the South African polymers market,” states the report.
“Capacities are not expected to rise significantly or at a rate that will challenge competitors in the Middle East and Asia,” states the report. In 2011 South Africa had petrochemical capacities of 650 000 tonnes per annum (tpa) of ethylene, 330 000 tpa of propylene, 560 000 tpa of polyethylene (PE), 60 000 tpa of polyethylene terephthalate (PET), 200 000 tpa of vinyl chloride monomer/polyvinyl chloride (PVC), 680 000 tpa of polypropylene (PP) and 145 000 tpa of methanol.
The South African based petrochemicals group Sasol’s ethylene purification unit at its Sasol Polymers plant is set to come on-stream by mid-2013. The company hopes to increase ethylene production by about 48 000 tpa by 2015 and will have polyethylene production facilities, thereby reducing the import dependency of South African plastics converters. “There are no further plans for significant expansion or new plants over the next five years,” states the BMI research.
Over the last quarter, BMI has revised certain forecasts and views. Ethylene feedstock constraints, caused by instability in supply at Sasol’s coal-to-liquids plant at Secunda, are undermining polymer margins, particularly the company’s production of low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE). As a result, the country will be forced to rely on imports.
Oil and gas
“With only limited conventional domestic reserves available, South Africa has learned to make efficient use of its natural resources,” states BMI’s South Africa Oil and Gas Report Q3 2012.
Synthetic oil production adds nearly 200 000 barrels per day (b/d) to the country’s output, and this figure could exceed 250 000 b/d by 2021, states the report. The main trends and developments in South Africa’s oil and gas sector include the following key areas:
South Africa has limited oil reserves, which stand at about 15-million barrels (bbl), according to 2011 estimates from the Energy Information Administration (EIA). BMI expects this to decline over their forecast period, with just 13,5-million bbl expected in 2021. However, BMI expects liquids production to increase from an estimated 183 000 b/d in 2011 to less than 290 000 in 2021.
The consumption of crude oil is forecasted to rise steadily over BMI’s 10-year forecast period, which is broadly in line with South Africa’s gross domestic (GDP) growth. The report anticipates that domestic demand will rise from an estimated 610 000 b/d in 2011 to 783 000 b/d in 2021.
A significant share of this consumption will be met with synthetic fuels (synfuels) derived from coal-to-liquid (CTL) and gas-to-liquid (GTL) processes, states the report. The local company Sasol owns the 160 000 b/d CTL Secunda plant and state-backed PetroSA operates the 45 000 b/d Mossgas GTL facility, which combined add nearly 205 000 b/d to domestic liquids production.
Sasol has plans to expand production by another 30 000 b/d and has proposed to build the 80 000 b/d Mafutha plant. As a result, the report expects synfuels production to grow from an estimated 160 000 b/d in 2011 to 258 000 b/d in 2021.
Although there is the potential to source gas from the Orange basin and the onshore shale formations in the Karoo basins, BMI believes it is too early to adopt an overtly optimistic stance. It would take several years to see large-scale production, which implies that the impact of shale gas may only be felt beyond our 10-year forecast period,” states the report.
With regard to the Orange basin, BMI believes that the development of gas production could grow much faster and the report forecasts that South Africa could produce 3,5-billion cubic metres (bcm) of gas in 2012. The report forecasts that this will increase significantly over the 10-year forecast period, reaching 6,8bcm by 2021.
Bolstered by strong macro-economic growth, infrastructure projects and GTL, domestic gas consumption is set to increase substantially from an estimated 5,16bcm in 2011 to 9,74 by 2021, states the report.
In terms of infrastructure, many ambitious projects have been proposed, particularly in the downstream sector. “The 400 000 b/d Mthombo refining complex in Coega epitomises the country’s willingness to remain a leader in the sector,” states the report. South Africa also hopes to increase its synthetic oil output through Sasol’s proposed expansion of the Secunda CTL facility, which would add another 30 000 b/d, and the construction of the proposed 80 000 b/d Mafutha CTL.
South Africa’s dependence on imports leads to high volatility in the country’s energy bill. According to the report, tight supply due to booming demand in emerging markets is clearly a risk for the country. BMI forecasts that the Organisation for Petroleum Exporting Countries (OPEC) basket oil prices will increase from an estimated US$107,52 per barrel (bbl) in 2011 to US$111,47 bbl in 2012, thus creating downside risk for South Africa’s macro-economic outlook.
Full acknowledgement and thanks are given to Business Monitor International’s South Africa Petrochemicals Report Q3 2012, and Business Monitor International’s South Africa Oil and Gas Report Q3 2012 for the information given to write this article.