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Reliance Industries Limited, India
Challenges and Innovative Business Modelsfor Emerging Africa in Downstream Hydrocarbon
Sector
2
Africa – size is a challenge!
* Image and information courtesy: CITAC
Amazing geography
Challenge is to meet energy needs of 1 billion people spread over 30 million Sq. kms
(as compared to India 1.2 billion people spread over 3 million Sq.kms)
3
Demand growth shift
Source: IEA June 2009
Demand growth shifting to developing markets including Africa
4
World Per Capita Oil Consumption
Africa and India have similar challenge
Source: BP Statistical Review 2009
Figures in Tonnes for 2008
5
Per Capital Oil Consumption in Litres / Day
0
2
4
6
8
10
12
US
Korea
Norway
Japan
OECDIta
ly
Fran
ce UK ME
World FS
U
L Am
er
China
Africa
Indi
a
Litre
Large potential for growth
Demand growth will be driven by rising economic aspirations
Source: CITAC
Challenges in Refining
7
Challenges ahead in refining sector
Quality of crude oil processed
Product specifications
Refinery configuration
Refinery Capacities
Investment in Refineries
– New Refineries
– Upgradation
8
Quality of crude oil – look ahead
Quality of Crude oil processed in Africa (2007-2030)
Quality of crude oil processed in Africa is expected to improve in terms of gravity and sulphur content
Source: Hart Energy
9
Auto fuels specifications – current standards
Majority of Africa needs to improve fuel specifications
Gasoline
Gas oil
Source: ICF International
10
AFRI specificationsGasoline
Source: HART/ARA/IPIECA 2007
Challenges to formulate fuel specifications to reduce Sulphur.
Gasoil
11
Auto fuel specifications – look ahead
Gasoline Gasoil
Gradual reduction of Benzene in Gasoline & Sulphur in Gas oil is envisaged – challenge is to leapfrog
Afri 4 Sulphur 150 ppm Afri 4 Sulphur 50 ppm
Source: HART
12
Refinery configuration
Majority of Capacity falls in the complexity range below 4.0
African Refinery Complexity Ranking
Source: HART
13
Refinery configuration
African Top 10 Refinery Complexity Ranking (Capacity above 50,000 bpd)
Presence of Catalytic reformers in above refineries indicates regional orientation towards gasoline production
Source: HART
14
Product demand slate - look ahead
African Refinery, Blender Input and Production (2007-2030) mbpd
Demand slate is scheduled to shift from Gasoline to Gasoil
18%
19%
38%
29%
Source: HART
15
African Projected Capacity Requirements (2007-2030) (mbpd)
Refinery capacity
Crude Distillation is likely to be increased by over 30%, conversion and hydro processing will be doubled
Source: HART
16
Trading Zones
1999- 2004 2005 2006 2007 2008 Q1-
2009Q2-
2009Q3-
2009Oct 09
Nov 09
Singapore
(Dubai Crack)
3.1 6.9 5.6 7.6 6.1 5.6 4.1 3.2 1.20 1.72
Europe
(Brent Crack)2.2 6.2 4.9 4.9 8.2 4.7 3.2 3.3 2.93 2.82
USGC
(WTI Crack)1.6 7.9 7.9 9.8 6.2 7.5 4.9 3.6 1.11 0.29
Investment in refineries
US $/bbl
Investment in quality up gradation, conversion and new refinery assets is a challenge considering current uncertain view on refining margins
Refinery Margins
Source: Reuters
Challenges in Marketing
18
Marketing - Challenges
Deregulation started in the 90s
Previously, markets dominated by Majors in almost all countries
Main reforms implemented included– End of monopolies and liberalization of the
marketing activities– Privatizations– Free imports, transport, storage, supply– Free prices in some countries– Still a long way to full deregulation
Consequences impacted the competitive landscape– Pressure on margins– New marketing companies appeared– Emergence of local African champions– Exit of traditional players
19S
ou
rce
: S
ou
rce
:
A new paradigm in marketing…
So
urc
e :
S
ou
rc
e :
Chevron, BP whollyfocused on SADC
Source: PFC Energy
20
Africa: Service Station Networks (2004-2009)
0
5,000
Total Shell Engen Chevron OiLibya BP PetroCI-MRS
ExxonMobil Oando Kenol Sasol Reliance
Service Stations
+16%
-20%
+14%
-38%
+596% -12%
-67%
+0% +117%
n/a
+47%n/a
Source: PFC Energy – Downstream Africa Service
Africa: Changes in Service Station Networks (2004-2009)
-1,500
0
1,500
OiLibya PetroCI-MRS
Total Reliance Kenol Engen Sasol Oando BP Shell Chevron ExxonMobil
Service Stations
Source: PFC Energy – Downstream Africa Service
… Impacting the competitive landscape
Source: PFC Energy
21
Product Transportation, Distribution and Storage Infrastructure
Main Downstream Infrastructures
Lamu
Mombasa
Port Sudan
Durban
Nacala
Beira
From Mangalore refinery (India)
Maputo
Tamatave
Djibouti
Nouadibou
Nouakchott
Walvis Bay
Windhoek
Lobito
Luanda
Muanda/MatadiPointe Noire
Port Gentil
Ndola
Cape Town Mossel Bay
Addis Ababa
Massawa/Assab
Dar es Salam
Dakar
Abidjan
Skikda
Mohamedia
Alexandria
Suez
Richards Bay
Refinery (crude, GTL, CTL)
Refinery Project
Crude oil pipeline
Oil products pipeline
Planned pipeline
Main Oil Products Terminal (with port on the sea)
Transport by truck
Transport by Rail
Transport by Boat
Main imports Terminals
Refinery (crude, GTL, CTL)
Refinery Project
Crude oil pipeline
Oil products pipeline
Planned pipeline
Main Oil Products Terminal (with port on the sea)
Transport by truck
Transport by Rail
Transport by Boat
Main imports Terminals
Main Downstream Infrastructures
Lamu
Mombasa
Port Sudan
Durban
Nacala
Beira
From Mangalore refinery (India)
Maputo
Tamatave
Djibouti
Nouadibou
Nouakchott
Walvis Bay
Windhoek
Lobito
Luanda
Muanda/MatadiPointe Noire
Port Gentil
Ndola
Cape Town Mossel Bay
Addis Ababa
Massawa/Assab
Dar es Salam
Dakar
Abidjan
Skikda
Mohamedia
Alexandria
Suez
Richards Bay
Investment in infrastructure of Ports, Terminals and Pipelines essential to meet growth in demand
Source: PFC Energy
Main Downstream Infrastructures
Lamu
Mombasa
Port Sudan
Durban
Nacala
Beira
From Mangalore refinery (India)
Maputo
Tamatave
Djibouti
Nouadibou
Nouakchott
Walvis Bay
Windhoek
Lobito
Luanda
Muanda/MatadiPointe Noire
Port Gentil
Ndola
Cape Town Mossel Bay
Addis Ababa
Massawa/Assab
Dar es Salam
Dakar
Abidjan
Skikda
Mohamedia
Alexandria
Suez
Richards Bay
Refinery (crude, GTL, CTL)
Refinery Project
Crude oil pipeline
Oil products pipeline
Planned pipeline
Main Oil Products Terminal (with port on the sea)
Transport by truck
Transport by Rail
Transport by Boat
Main imports Terminals
Refinery (crude, GTL, CTL)
Refinery Project
Crude oil pipeline
Oil products pipeline
Planned pipeline
Main Oil Products Terminal (with port on the sea)
Transport by truck
Transport by Rail
Transport by Boat
Main imports Terminals
Main Downstream Infrastructures
Lamu
Mombasa
Port Sudan
Durban
Nacala
Beira
From Mangalore refinery (India)
Maputo
Tamatave
Djibouti
Nouadibou
Nouakchott
Walvis Bay
Windhoek
Lobito
Luanda
Muanda/MatadiPointe Noire
Port Gentil
Ndola
Cape Town Mossel Bay
Addis Ababa
Massawa/Assab
Dar es Salam
Dakar
Abidjan
Skikda
MohamediaAlexandria
Suez
Richards Bay
22
Transition to LPG from Bio fuels
Like India, transition to LPG from biomass necessary due to environment and health impact
Barring Oil Rich Countries in North Africa, LPG Penetration in other countries is low
Government support is necessary to enable investments in upgrading infrastructure such as terminals, bottling plants etc. by – Import Duty waiver on capital equipment required for
Import terminals, Bottling plants, Cylinders etc.– Collaborating with multilateral financing agencies – Arranging Micro financing to customers
Priority attention by stake holders for promoting LPG is the need of the hour
Innovative Business Models
24
Refining – Adopt Hub and Spoke model
Regional Economic Communities (RECs) expanding in Africa which should facilitate rapid integration of economic and energy projects.
COMESA, EAC, and SADC, create a single African Free Trade Zone, consisting of 26 countries with a GDP of an estimated $624bn (£382.9bn).
AFTZ would ease access to markets within the zone
REC Image courtesy: Wikipedia
Refining hubs to serve Zones on regional basis rather than country basis may help develop large size and complex
refineries
25
Undertake Policy initiatives for…
Refinery revamps
Stake Buy-outs in existing refineries / RO networks
Building new refineries
Provision of Skills to refineries
Building cost-efficiencies in Logistics, marketing and distribution through collaborations
Process Automation
Enabling networking operations on regional basis for IOCs
Enabling harmonized tax structures within regions
Building cost-efficiencies in Logistics, marketing and distribution through collaborations and economies of scale
26
Innovative Financing
– Diaspora Bonds*/ Partial risk guarantees by World Bank/IDA/MIGA
Collaboration structures and project management for refining, infrastructure projects
Developing structured risk management
Technology based innovations
E-learning and blended learning
Improving infrastructure
Managing Oil Major Legacies of systems and processes effectively
Improving service orientations at ROs through exchange of best practices
Explore innovative collaboration for…
* Estimated potential:5-10 billion USD annually Source: Innovative financing for development- World Bank
27
Cooperate for sustainable growth and development
International co-operation is essential to effect the transition to more sustainable patterns of consumption and production .
Cooperation with India would help Africa to attract scarce investment capital, to maximize Africa's energy potential, and to increase India’s energy security Thank
you!