final report sub-saharan africa refinery project - world bank

World Bank Refinery Report 1

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Submitted by:ICF International

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Final Report Sub-Saharan Africa Refinery Project Volume II-A: Refinery Study

September 2009

Submitted to: The World Bank and The African Refiners Association

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Volume II-A: Final Refinery Study Report Table of Contents

ICF International i World Bank September 2009

TABLE OF CONTENTS

PageLIST OF EXHIBITS ............................................................................................................... iii ACKNOWLEDGEMENTS...................................................................................................vii ACRONYMS.........................................................................................................................viii INTRODUCTION .................................................................................................................... 1 OVERVIEW ........................................................................................................................ 1 FUEL SPECIFICATIONS ..................................................................................................... 2 OIL PRICES........................................................................................................................ 4 REGIONAL GROUPINGS..................................................................................................... 5 THE GLOBAL ECONOMIC RECESSION ............................................................................... 7 STRUCTURE OF THE REPORT............................................................................................ 8 2: ANALYTICAL APPROACH AND ASSUMPTIONS .................................................... 9 ANALYTICAL APPROACH .................................................................................................. 9 MODEL USED................................................................................................................... 10 WORLD® MODELING CASE STRATEGY ........................................................................... 10 ASSUMPTIONS ................................................................................................................ 11 GLOBAL ASSUMPTIONS .................................................................................................. 11 SUB-SAHARAN AFRICA ASSUMPTIONS......................................................................... 16 DEMAND ................................................................................................................... 16 CONSTRAINTS ON SUB-SAHARAN REFINERIES IN WORLD®......................................... 17 SSA PETROLEUM PRODUCT SPECIFICATIONS............................................................... 18 MECHANISMS FOR ACHIEVING AFRI-4 STANDARDS ............................................ 22 3: THE BASE CASE AND THE 2015 CASES ................................................................ 24 WORLD® MODEL BASE CASE RESULTS ......................................................................... 24 REFINERY CONFIGURATIONS AND NAMEPLATE CAPACITY ....................................... 24 WORLD® MODEL 2015 CASES RESULTS....................................................................... 29 CURRENT FUEL SPECIFICATIONS IN 2015: WORLD® CASE 215 ................................. 29 AFRI-4 FUEL SPECIFICATIONS IN 2015: WORLD® CASE 216....................................... 40 WORLD® MODEL RESULTS: BASE CASE AND 2015 CASES COMPARED ....................... 50 4: THE 2020 CONSTRAINED CASES ............................................................................. 53 OVERVIEW....................................................................................................................... 53 CONSTRAINED CASES RESULTS ..................................................................................... 54 CONSTRAINED CASE: CURRENT FUEL SPECIFICATIONS IN 2020: WORLD®

CASE 224 ........................................................................................................................ 54 CONSTRAINED CASE: AFRI-4 SPECIFICATIONS IN 2020: WORLD® CASE 220 .......... 64 WORLD® MODEL RESULTS: BASE CASE AND 2020 CONSTRAINED CASES

COMPARED ..................................................................................................................... 76 5: THE 2020 OPEN MARKET CASES............................................................................. 79 OVERVIEW....................................................................................................................... 79 OPEN MARKET CASES RESULTS ..................................................................................... 79 OPEN MARKET CASE (FAVORABLE TO SSA): CURRENT SPECIFICATIONS IN 2020:

WORLD® CASE 221......................................................................................................... 79 OPEN MARKET CASE (FAVORABLE TO SSA): AFRI-4 SPECIFICATIONS IN 2030:

WORLD® CASE 222 ......................................................................................................... 92

Volume II-A: Final Refinery Study Report Table of Contents

ICF International ii World Bank September 2009

OPEN MARKET CASE (UNFAVORABLE TO SSA): AFRI-4 SPECIFICATIONS IN 2020: WORLD— CASE 223 ...................................................................................................... 104

WORLD® MODEL RESULTS: BASE CASE AND 2020 OPEN MARKET CASES COMPARED ................................................................................................................... 126

6: COST BENEFIT ANALYSIS AND CONCLUSIONS ............................................... 129 SUMMARY OF IMPACTS ON SSA REFINING ECONOMICS......................... 129 INCREMENTAL SUPPLY COSTS OF AFRI-4 .................................................................... 134 COST BENEFIT ANALYSIS ............................................................................................ 138 CONCLUSIONS AND RECOMMENDATIONS..................................................................... 140 BIBLIOGRAPHY ................................................................................................................ 144 DATABASES ................................................................................................................. 144 NEWSPAPERS AND TRADE JOURNALS ......................................................................... 144 OTHER SOURCES .......................................................................................................... 144

Volume II-A: Final Refinery Study Report List of Exhibits

ICF International iii World Bank September 2009

LIST OF EXHIBITS Page

Exhibit 1-1: AFRI Standards for Sub-Saharan Africa Transportation Fuels .................................. 3 Exhibit 1-2: Sub-Saharan Africa Demand Regions ........................................................................ 6 Exhibit 1-3: Sub-Saharan Africa Refinery Supply Regions ........................................................... 7 Exhibit 2-1: Modeling Case Descriptions ..................................................................................... 11 Exhibit 2-2: Differentials versus Crude Oil - Singapore............................................................... 13 Exhibit 2-3: Differentials versus Crude Oil – N.W. Europe ......................................................... 13 Exhibit 2-4: Differentials versus Crude Oil – USGC.................................................................... 14 Exhibit 2-5: Bonny Light versus Brent Crude oils........................................................................ 15 Exhibit 2-6: Model Constraints ..................................................................................................... 18 Exhibit 2-7: Gasoline Official Government Specifications in Africa ........................................... 19 Exhibit 2-8: Estimated Marketplace Gasoline Actual Qualities (Domestic and Imported ........... 20 Exhibit 2-9: Gasoil Official Government Specifications in Africa............................................... 21 Exhibit 2-10: Estimated Marketplace Gasoil Actual Qualities (Domestic and Imported)............ 23 Exhibit 3-1: Base Case Sub-Saharan Africa Refineries, 2008 ...................................................... 26 Exhibit 3-2: Base Case 210: Detailed Sub-Saharan Africa Refinery Capacities, 2008 ................ 27 Exhibit 3-3: Base Case 210: Revamping and Debottlenecking .................................................... 28 Exhibit 3-4: Base Case 210: Investment Costs ............................................................................ 28 Exhibit 3-5: 2015 Case 215: Incremental Capacity Requirements (Current Fuel Specifications) 31 Exhibit 3-6: 2015 Case 215: SSA Refinery Capacity and Throughput (Current Fuel Specifications)............................................................................................................................... 32 Exhibit 3-7: 2015 Case 215: Incremental Investment Costs (Current Fuel Specifications) $(2007) Billions .......................................................................................................................................... 33 Exhibit 3-8: 2015 Case 215: SSA Refinery Product Production and Yields (Current Fuel Specifications)............................................................................................................................... 34 Exhibit 3-9: 2015 Case 215: SSA Refinery Fuel and Losses (Current Fuel Specifications) ........ 35 Exhibit 3-10: 2015 Case 215: SSA Gasoline production and Trade (Current Fuel Specifications)....................................................................................................................................................... 36 Exhibit 3-11: 2015 Case 215: SSA Distillates Production and Trade (Current Fuel Specifications)....................................................................................................................................................... 37 Exhibit 3-12: 2015 Case 215: SSA Products Balance (Current Fuel Specifications)................... 38 Exhibit 3-13: 2015 Case 215: SSA Finished Products Supply Costs and Crack Spreads (Current Fuel Specifications)....................................................................................................................... 39 Exhibit 3-14: 2015 Case 216: Incremental Capacity Requirements (AFRI-4 Fuel Specifications)....................................................................................................................................................... 42 Exhibit 3-15: 2015 Case 216: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications)............................................................................................................................... 43 Exhibit 3-16: 2015 Case 216: Incremental Investment Costs (AFRI-4 Specifications) $(2007) Billions .......................................................................................................................................... 43 Exhibit 3-17: 2015 Case 216: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications)............................................................................................................................... 44 Exhibit 3-18: 2015 Case 216: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications)...... 45


ICF International iv World Bank September 2009

Exhibit 3-19: 2015 Case 216: SSA Gasoline production and Trade (AFRI-4 Fuel Specifications)....................................................................................................................................................... 46 Exhibit 3-20: 2015 Case 216: SSA Distillates Production and Trade (AFRI-4 Fuel Specifications)............................................................................................................................... 47 Exhibit 3-21: 2015 Case 216: SSA Products Balance (AFRI-4 Fuel Specifications)................... 48 Exhibit 3-22: 2015 Case 216: SSA Finished Products Supply Costs and Crack Spreads (AFRI-4 Fuel Specifications)....................................................................................................................... 49 Exhibit 3-23: Base Case and 2015 Cases Summary Report: Total Product Demand and Net Imports .......................................................................................................................................... 51 Exhibit 3-24: Base Case and 2015 Cases Summary Report: Total Gasoline and Diesel Demand and Refinery Crude Oil Runs ........................................................................................................ 51 Exhibit 3-25: Base Case and 2015 Cases Summary Report: Incremental Refinery Distillation Expansions and Total Investments................................................................................................ 52 Exhibit 3-26: Base Case and 2015 Cases Summary Report: Total Product Supply Cost and AFRI Gasoline and Diesel Supply Cost .................................................................................................. 52 Exhibit 4-1: 2020 Constrained Case 224: Incremental Capacity Requirements (Current Fuel Specifications)............................................................................................................................... 56 Exhibit 4-2: 2020 Constrained Case 224: SSA Refinery Capacity and Throughput (Current Fuel Specifications)............................................................................................................................... 57 Exhibit 4-3: 2020 Constrained Case 224: Incremental Investment Costs (Current Fuel Specifications) $(2007) Billions.................................................................................................... 57 Exhibit 4-4: 2020 Constrained Case 224: SSA Refinery Product Production and Yields (Current Fuel Specifications)....................................................................................................................... 58 Exhibit 4-5: 2020 Constrained Case 224: SSA Refinery Fuel and Losses (Current Fuel Specifications)............................................................................................................................... 59 Exhibit 4-6: 2020 Constrained Case 224: SSA Gasoline Production and Trade (Current Fuel Specifications)............................................................................................................................... 60 Exhibit 4-7: 2020 Constrained Case 224: SSA Distillates Trade (Current Fuel Specifications) .. 61 Exhibit 4-8: 202 Constrained Case 224: SSA Products Balance (Current Fuel Specifications)... 62 Exhibit 4-9: 2020 Constrained Case 224: SSA Finished Products Supply Costs and Crack Spreads (Current Fuel Specifications)........................................................................................... 63 Exhibit 4-10: 2020 Constrained Case 220: SSA Incremental Capacity Requirements (AFRI-4 Fuel Specifications)....................................................................................................................... 66 Exhibit 4-11: 2020 Constrained Case 220: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications)............................................................................................................................... 67 Exhibit 4-12: 2020 Constrained Case 220: SSA Incremental Investment Costs (AFRI-4 Fuel Specifications) $(2007) Billions.................................................................................................... 68 Exhibit 4-13: 2020 Constrained Case 220: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications)....................................................................................................................... 68 Exhibit 4-14: 2020 Constrained Case 220: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications)............................................................................................................................... 70 Exhibit 4-15: 2020 Constrained Case 220: SSA Gasoline Trade (AFRI-4 Fuel Specifications).. 71 Exhibit 4-16: 2020 Constrained Case 220: SSA Distillates Trade (AFRI-4 Fuel Specifications) 72 Exhibit 4-17: 2020 Constrained Case 220: SSA products Balance (AFRI-4 Fuel Specifications)....................................................................................................................................................... 73 Exhibit 4-18: 2020 Constrained Case 220: SSA Finished Products Supply Costs and Crack Spreads (AFRI-4 Fuels Specifications)......................................................................................... 75


ICF International v World Bank September 2009

Exhibit 4-19: Base Case and 2020 Constrained Cases Results: Total Product Demand and Total Net Imports.................................................................................................................................... 77 Exhibit 4-20: Base Case and 2020 Constrained Cases Results: Total Gasoline and Diesel Demand and Refinery Crude Oil Runs ......................................................................................... 77 Exhibit 4-21: Base Case and 2020 Constrained Cases Results: Incremental Refinery Distillation Expansion and Total Investments ................................................................................................. 78 Exhibit 4-22: Base Case and 2020 Constrained Cases Results: Total Product Supply Cost and Gasoline and Diesel Supply Cost .................................................................................................. 78 Exhibit 5-1: 2020 Open Market Case 221: SSA Incremental Capacity Requirements (Current Fuel Specifications): Economically Favorable to SSA................................................................. 81 Exhibit 5-2: 2020 Open Market Case 221: SSA Refinery Capacity and Throughput (Current Fuel Specifications): Economically Favorable to SSA ......................................................................... 82 Exhibit 5-3: 2020 Open Market Case 221: SSA Incremental Investment Costs (Current Fuel Specifications): Economically Favorable to SSA ......................................................................... 83 Exhibit 5-4: 2020 Open Market Case 221: SSA Refinery Product Production and Yields (Current Fuel Specifications): Economically Favorable to SSA................................................................. 84 Exhibit 5-5: 2020 Open Market Case 221: SSA Refinery Fuel and Losses (Current Fuel Specifications): Economically Favorable to SSA ......................................................................... 85 Exhibit 5-6: 2020 Open Market Case 221: SSA Gasoline Trade (Current Fuel Specifications): Economically Favorable to SSA ................................................................................................... 86 Exhibit 5-7: 2020 Open Market Case 221: SSA Distillates Trade (Current Fuel Specifications): Economically Favorable to SSA ................................................................................................... 87 Exhibit 5-8: 2020 Open Market Case 221: SSA Products Balance (Current Fuel Specifications): Economically Favorable to SSA ................................................................................................... 89 Exhibit 5-9: 2020 Open Market Case 221: SSA Finished Products Supply Costs and Crack Spreads (Current Fuel Specifications): Economically Favorable to SSA..................................... 90 Exhibit 5-10: 2020 Open Market Case 222: SSA Incremental Capacity Requirements (AFRI-4 Fuel Specifications): Economically Favorable to SSA................................................................. 93 Exhibit 5-11: 2020 Open Market Case 222: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications): Economically Favorable to SSA................................................................. 94 Exhibit 5-12: 2020 Open Market Case 222: SSA Incremental Investment Costs (AFRI-4 Fuel Specifications): Economically Favorable to SSA, $(2007) Billions............................................. 95 Exhibit 5-13: 2020 Open Market Case 222: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications): Economically Favorable to SSA.............................................................. 96 Exhibit 5-14: 2020 Open Market Case 222: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications): Economically Favorable to SSA ......................................................................... 97 Exhibit 5-15: 2020 Open Market Case 222: SSA Gasoline Trade (AFRI-4 Fuel Specifications): Economically Favorable to SSA ................................................................................................... 98 Exhibit 5-16: 2020 Open Market Case 222: SSA Distillates Trade (AFRI-4 Fuel Specifications): Economically Favorable to SSA ................................................................................................. 100 Exhibit 5-17: 2020 Open Market Case 222: SSA Products Balance (AFRI-4 Fuel Specifications): Economically Favorable to SSA ................................................................................................. 101 Exhibit 5-18: 2020 Open Market Case 222: SSA Finished Products Supply Costs and Crack Spreads (AFRI-4 Fuel Specifications): Economically Favorable to SSA .................................. 102 Exhibit 5-19: Favorable versus Unfavorable Cases Parameters ................................................ 104 Exhibit 5-20: 2020 Open Market Case 223: SSA Incremental Capacity Requirements (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA........................................................... 105


ICF International vi World Bank September 2009

Exhibit 5-21: 2020 Open Market Case 223: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA........................................................... 107 Exhibit 5-22: 2020 Open Market Case 223: SSA Incremental Investment Costs (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA, $(2007) Billions....................................... 109 Exhibit 5-23: 2020 Open Market Case 223: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA........................................................ 111 Exhibit 5-24: 2020 Open Market Case 223: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA ................................................................... 113 Exhibit 5-25: 2020 Open Market Case 223: SSA Gasoline Trade (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA ............................................................................................. 116 Exhibit 5-26: 2020 Open Market Case 223: SSA Distillates Trade (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA ............................................................................................. 118 Exhibit 5-27: 2020 Open Market Case 223: SSA Products Balance (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA ............................................................................................. 120 Exhibit 5-28: 2020 Open Market Case 223: SSA Finished Supply Costs and Crack Spreads (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA ............................................ 123 Exhibit 5-29: Base Case and 2020 Open Market Cases Results: Total Product Demand and Total Net Imports.................................................................................................................................. 127 Exhibit 5-30: Base Case and 2020 Open Market Cases Results: Total Gasoline and Diesel Demand and Refinery Crude Oil Runs ....................................................................................... 127 Exhibit 5-31: Base Case and 2020 Open Market Cases Results: Incremental Refinery Distillation Expansions and Incremental Total Investments.......................................................................... 128 Exhibit 5-32: Base Case and 2020 Open Market Cases Results: Total Product Supply Costs and AFRI Gasoline and Diesel Supply Cost...................................................................................... 128 Exhibit 6-1: Africa West Price and Crack Spreads (relative to Bonny Light) ............................ 130 Exhibit 6-2: Africa South Price and Crack Spreads (relative to Saudi Light) ............................ 131 Exhibit 6-3: Africa East Price and Crack Spreads (relative to Saudi Light)............................... 132 Exhibit 6-4: Incremental Supply Costs of AFRI-4: Refinery Crude Oil Runs, Refinery Expansions, and Refinery Investments ....................................................................................... 135 Exhibit 6-5: Evolution of SSA Product Demand, Refinery Crude oil Runs, and Net Product Imports, 2010-2020 ..................................................................................................................... 135 Exhibit 6-6: Incremental Supply Costs of AFRI-4: Total Product Supply Costs and Gasoline and Diesel Supply Costs .................................................................................................................... 136 Exhibit 6-7: Incremental Supply Costs to the Consumer of AFRI-4 Gasoline and Diesel ......... 136 Exhibit 6-8: Monetary Valuation of the Health Benefits ............................................................ 138 Exhibit 6-9: Total Refinery Sector Investments from the Eight Cases (Billions of 2007$) ....... 139 Exhibit 6-10: Incremental Costs for the Refinery Sector to Move to AFRI-4 Fuel Specifications (Billions of 2007$) ...................................................................................................................... 139 Exhibit 6-11 Net Present Value of Refinery Supply Costs versus Health Benefits over 10 Years..................................................................................................................................................... 140 Exhibit 6-12: Incremental Unit Supply Costs for AFRI-4 Fuels in the Constrained and the Open Markets Cases ............................................................................................................................. 141

Volume II-A: Final Refinery Study Report Acknowledgements

ICF International vii World Bank September 2009

ACKNOWLEDGEMENTS

ICF International would like to thank two organizations who generously provided help for this report:

• The African Refiners Association whose members, particularly the Sub-Saharan Africa members, responded fully and rapidly to our many requests for data, and

• CITAC Africa LLP who generously shared with us their extensive database on

refineries and petroleum usage in Africa. We would particularly like to thank Mark Elliott of CITAC who provided us with many useful suggestions and comments based on his many years of experience in the petroleum industry in Africa.

Volume II-A: Final Refinery Study Report Acronyms

ICF International viii World Bank September 2009

ACRONYMS AEO............................Annual Energy Outlook ARA ...................African Refiners Association Bbbls..........................................Billion Barrels Bbls........................................................Barrels Bmt ................................. Billion metric tonnes BOE........................... Barrel of Oil Equivalent BTX........................Benzene, Toluene, Xylene CIF................ Customs, Insurance, and Freight CTL .........................................Coal-to-Liquids DOE...............................Department of Energy DOT.................. Department of Transportation EIA .......... Energy Information Administration EPA ............Environmental Protection Agency EU...........................................European Union FCC ..............................Fluid Catalytic cracker FOB ............................................Free on board GDP............................ Gross domestic product GTL ..........................................Gas-to-Liquids H2 .................................................................................Hydrogen HCR...................................Hydrocracking unit HDS.........................Hydrodesulfurization unit IEA ..................... International Energy Agency IFO .................................Intermediate Fuel Oil IMF..................... International Monetary Fund IMO ........ International Maritime Organization IPIECA......... International Petroleum Industry

........Environmental Conservation Association LNG ..............................Liquefied Natural Gas Mb/d......................... Thousand barrels per day Mcf/d....................Thousand cubic feet per day MDO ......................................Marine diesel oil MGO ..........................................Marine gas oil MM ................................................. Million (s) MMb/d .........................Million barrels per day MMt/y ....................... Million Tonnes per Year MTBE ..................Methyl Tertiary Butyl Ether MW................................................. Megawatts NGLs................................ Natural Gas Liquids O&M.................... Operation and Maintenance OECD ...................Organization for Economic ...................... Co-operation and Development PM........................................Particulate Matter PPM .......................................Parts per Million RFO.......................................Refinery Fuel Oil SECA ................... SOx Emission Control Area SOx...................................................................Sulfur Dioxide SSA ................................... Sub-Saharan Africa Tonne ...............................................Metric ton UNEP United Nations Environmental Program USGC...................................... U.S. Gulf Coast WORLD®.World Oil Refining, Logistics, and .................................................Demand Model

Volume II-A: Final Refinery Study Report Introduction

ICF International 1 World Bank September 2009

INTRODUCTION

OVERVIEW Over the past two decades with the growing awareness of the role that emissions play in human health and environmental degradation there has been a general movement in many parts of the world to control these emissions as a means of ameliorating the impacts. This has mainly taken two forms: 1) the development and subsequent required use of control devices that can be used on stationary sources and vehicle sources and, 2) changes in the specifications of transportation fuels that reduce the combustion emissions of the major pollutants. These trends originated in the industrialized countries of the OECD and are now spreading, at different rates, throughout the world. The past decade has seen most countries in Sub-Saharan Africa (SSA) grow strongly. This strong economic growth has been matched by the growth of the middle class and the growth of higher levels of disposable income which in turn has led to the increasing use of private vehicles. The rapid economic development has caused increased urbanization, increased vehicle use, and increased pollution and associated health impacts, particularly among the poor. Despite the current recession, all indications are that SSA will eventually continue on this track resulting in further vehicle use and, if no changes are made to vehicles and fuels, still more pollution. As in the West, the first improvement in the specifications of transportation fuels in Africa was the reduction of lead in gasoline. Beginning in 2001 African refineries, under the auspices of the Clean Air Initiative, began eliminating lead from gasoline. The elimination of lead in gasoline allows the use of catalytic converters in exhaust vehicle systems, a basic technology to reduce emissions in general. The SSA refiners are now considering lowering the sulfur content of both gasoline and diesel fuel as the reduction of sulfur in both gasoline and diesel will reduce sulfur dioxide (SOx) and particulate (PM) emissions. In addition, the optimal functioning of vehicle catalytic converters is a function of the amount of sulfur in gasoline. In the case of new diesel-powered vehicles, high sulfur content in the fuel can result in both increased fuel consumption and plugging of the filters to the point where the engine loses power. Sulfur reduction therefore enables the fuels to work optimally with the latest generation vehicles which in turn will further benefit health outcomes. The World Bank and the African Refiners Association (ARA) have supported this two-part year-long study, the first of its kind in SSA. The study was funded by the World Bank –Energy Sector Management Assistance Program - ARA and co-sponsored by UNEP, and IPIECA. The main thrust of the study was to estimate the impact of a change to cleaner fuel specifications on refining operations, refinery investment costs, air quality, and human health in SSA. Ancillary concerns were the ability of the SSA refining sector to modernize and to hold its own in a highly competitive global market. The Study consists of two parts which are described in the text box below.



This report constitutes the Refinery study: the Health Study is published separately as is the overall Executive Summary and the Health and Refinery studies’ appendices. The rest of this introduction discusses certain critical parameters that impact all the case scenarios.

FUEL SPECIFICATIONS The growing complexity of the vehicle emission control technologies for both personal vehicles and commercial trucks and the growing awareness of the human health and environmental impact of vehicle source emissions have placed increasing requirements on refineries. Sulfur is not an additive but a natural part of crude oil. The removal processes present both technological and economic challenges to refiners. ARA has taken the lead in presenting “fuel specification bands” known as the AFRI Specifications modeled after the specifications now in force in the European Union (EU)1.Exhibit 1-1 following shows the main AFRI parameters for both gasoline and diesel. The assumption was made in the study that by 2020 the AFRI-4 level would be reached by all SSA refineries (sulfur content for gasoline 150 ppm, for diesel 50 ppm, and benzene content for gasoline 1%).

1 As of 2009 gasoline in the EU must have a maximum benzene content of 1% and sulfur content of 10 ppm. EU on-road diesel must have a cetane content of 51, a density of 845 at 15 C, and a sulfur content of 10 ppm.

Refinery Sector Study: To outline the upgrades necessary in the Sub-Saharan African refining sector by refining group and region to respond to global market and clean fuels trends, and to clarify the associated costs in terms of both refining investments and impacts on delivered cost of petroleum products in Sub-Saharan Africa by use of a global refining model, WORLD®. In addition, the study sets out the context for the Sub-Saharan Africa refining sector in the form of global projected downstream oil refining and market conditions.

Health Study: To estimate the change in air emissions associated with, 1) cleaner low sulfur transportation fuels and 2), synergisms between cleaner low sulfur transportation fuels and modern vehicles equipped with exhaust control systems, and to analyze the impact of the changes on human health, and estimate the health benefits in economic terms.

Volume II-A: Final Refinery Study ReportIntroduction

ICF International 3

World BankSeptember 2009

Exhibit 1-1: AFRI Standards for Sub-Saharan Africa Transportation Fuels

AFRI-1 AFRI-2 AFRI-3 AFRI-4GASOLINE

RON, min* 91 91 91 91MON, min 81 81 81 81Lead content** Unleaded Unleaded Unleaded UnleadedSulfur content, % mass, max 0.1 0.05 0.03 0.015Benzene content, % vol, max To be reported To be reported 5 1

DIESELSulfur content, % mass, max 0.8 0.35 0.05 0.005Density at 15 C, kg/litre (min/max) 800/890 800/890 800/890 820/880Centane index (calculated), min 42 45 45 45Lubricity (HFRR @ 60 C), micron, min To be reported To be reported 460 460*A higher grade of gasoline may be marketed if required** “Unleaded means <0.013g of lead per litre



OIL PRICES A central input into WORLD® is the future global crude oil price/supply/demand outlook with the crude oil price being a critical determinant. One “marker” crude oil price is needed as the model then computes the prices of all other crude oils (and products) as a function of quality and location. The global supply/demand projections, generally available with a regional breakdown, form “top levels” which are used to adjust underlying detailed level data and projections in WORLD®. The two main widely accepted sources for “official” price/supply/demand projections are those from the International Energy Agency2 (IEA) and the Energy Information Administration3 (EIA), the statistical arm of the U.S. Department of Energy. Both agencies tend to maintain close contact with each other. OPEC itself also publishes an annual projection4. There are also projections from private companies such as Deutsche Bank, Goldman Sachs and Global Insight, to cite a few. The recent extreme volatility of the global oil market has led to wide projected ranges of price and demand emanating from commercial firms and from the IEA, the EIA and others. We elected to use as starting points the projections from EIA’s 2009 Annual Energy Outlook (AEO2009) together with short term oil price adjustments from the EIA Short Term Energy Outlook published in February 2009.5 The AEO2009 “early release” Reference Case was published in January 2009 and, at the time, captured the main effects of the initial economic downturn in creating lower short term energy demand and a lower starting point for oil demand rebuild; also a relatively slow growth demand outlook driven by a progressive return to higher oil prices and related policy moves in the United States, the EU and elsewhere to promote conservation – notably transport fuel efficiency - and use of alternative energy, e.g. biofuels. In the AEO2009 the EIA incorporates substantial data from the IEA. That being the case, the combination of data from both sources does not cause the degree of problems that often arise from combining two data sources. However, given the continuing and worsening economic global conditions, we made further adjustments to the AEO2009. The main adjustment concerned the world oil price. The AEO embodied a sustained recovery and then rise in oil prices to $77.97/barrel (2007 dollars) for light sweet crude in 2010, to $109.96/barrel in 2015 and $116.93/barrel in 2020. This trajectory was considered by ICF to be too steep and not fully reflective of the current and likely future economic conditions. A price of $54.50/barrel (2007 dollars) was used for 2010, taken from the February 2009 EIA Short Term Energy Outlook. Prices were then extrapolated to $65/barrel in 2015 and $75/barrel in 2020 (all prices in 2007 dollars). The world oil prices for light sweet crude were translated into projected prices for Brent crude and entered into WORLD®. The model then calculated the prices of other crude oils

2 International Energy Agency, World Energy Outlook, various issues 3 Energy Information Administration, Annual Energy Outlook, and International Energy Outlook, various issues 4 OPEC, World Oil Outlook, various issues. The downstream analyses included in the Outlook are based on WORLD® assessments. 5 We would have preferred to use the IEA, World Energy Outlook, but at the time the decision on oil prices was made we were between publications of the World Energy Outlook and the oil market was so volatile that we felt that we could not use an old (relatively) projection.



All prices and costs used or cited in this report are in 2007 dollars.

in relation to this price, adjusting the other prices for quality and location. Product prices ex refinery gate were calculated as a function of:

• the crude oil and other feedstocks used in the specific refineries, • the process units available and selected as additions, and • the required product qualities and also the opportunities for interaction between

regions via product trade (e.g. potential imports from Europe, the Middle East and/or India).

REGIONAL GROUPINGS Although this study focuses on refineries, the model requires demand and supply historic data and projected estimates from all the countries in the world that are then aggregated up into regions. Focused SSA demand and supply regions were created. All the countries of SSA were divided into 3 large petroleum product demand regions, west, east and south. These three large regions were further subdivided into 9 refinery supply regions. Exhibit 1-2 shows the large demand regions and lists the countries included in each region underneath the map. Two countries, the Democratic Republic of the Congo (DRC) and Mozambique, are divided in two representing the logistics of supplying petroleum products to the different areas of those two countries. Exhibit 1-3 shows the various SSA refinery supply sub-regions superimposed over the three large demand regions. What is not shown on the map are the various other supply regions in the rest of the world that provide imports into SSA or destinations for exports from SSA. These are discussed further along in the report. The configuration of the supply and demand regions was arrived at in discussions with the World Bank and the ARA Steering Committee and is based on the patterns of supply/demand movements within SSA.



Exhibit 1-2: Sub-Saharan Africa Demand Regions

West East South Benin Burkina Faso Burundi Angola Cameroon Cape Verde Comoros Botswana C. A. R. Chad Djibouti Lesotho Congo Côte d'Ivoire DRC (East) Mozambique (South) DRC (West) Equatorial Guinea Eritrea Namibia Gabon Gambia Ethiopia Sao Tome & Principe Ghana Guinea Kenya South Africa Guinea-Bissau Liberia Madagascar Swaziland Mali Mauritania Malawi Niger Nigeria Mauritius Senegal Sierra Leone Mozambique (Central &

North)

Togo Rwanda Seychelles Somalia Sudan Tanzania Uganda Zambia Zimbabwe

Source: CITAC Africa LLP



Exhibit 1-3: Sub-Saharan Africa Refinery Supply Regions

SGI Senegal, Ghana, and Côte d’Ivoire CAM Cameroon NIG Nigeria COG Congo and Gabon ANG Angola SAF South Africa ZAM Zambia KEN Kenya SUD Sudan

Source: CITAC Africa LLC

THE GLOBAL ECONOMIC RECESSION When the modeling for this study began the United States was experiencing major economic difficulties which were just beginning to spread around the globe. At that time the International Monetary Fund (IMF) estimated that SSA would not be affected in a major way as the continent was not tied closely into the global financial structure. At worst the IMF estimated that GDP in SSA would, on average, fall by 1 percent.



From then on global conditions continued to deteriorate. SSA countries, many of which depend for revenue on the export of commodities to the West and to Asia, were substantially impacted by the precipitous fall in global trade driven by the fall in demand in the industrialized countries. The world is now experiencing the most severe recession since the depression of the 1930s. Most estimates are that the economies of the world will begin to emerge towards the end of 2010 but that the recovery, certainly for the industrialized world, will be weak. However, analysts are uncertain about the likelihood of this scenario for the next few years. Demand for petroleum products is in large part driven by GDP so that ICF was presented with a major conundrum in its product demand future estimates. Economic projections changed from month-to-month, always for the worse. Finally the decision was made to cease changing the projections and to base the analysis on much reduced demand understanding that the reality could be much worse. To deal with this possibility an additional 2020 case was developed in which demand was further substantially reduced in order to estimate the likely impacts. It should be noted that most projections believe that the developing nations will grow at a faster pace than the industrialized world once the world emerges from the recession.

STRUCTURE OF THE REPORT The rest of the report consists of the following chapters:

• Chapter 2: Analytical Approach and Assumptions • Chapter 3: The Base Case and the 2015 Cases • Chapter 4: The 2020 Constrained Cases • Chapter 5: The 2020 Open Market Cases • Chapter 6: Cost Benefit Analysis and Conclusions • Bibliography

Volume II-B contains four Appendices which are:

• Appendix A: Demand Estimates • Appendix B: WORLD® Model Assumptions • Appendix C: WORLD® Model Runs • Appendix D: WORLD® Model

Volume II-A: Final Refinery Study Report Analytical Approach and Assumptions


2: ANALYTICAL APPROACH AND ASSUMPTIONS

ANALYTICAL APPROACH As mentioned above in the Introduction, this work resulted in two linked studies allowing ICF to perform a cost/benefit assessment. The Health Study’s estimates of the monetary value of the health benefits are compared to the costs to the refining industry associated with a change in fuel specifications, by region, as estimated in this study. In the Health Study, the potential reduction in air pollutants with the use of reduced sulfur fuels was modeled for representative cities in each region, for three scenarios:

x� BASE CASE, reflecting current conditions. x� SCENARIO 1 applies improved fuel specifications to the Base Case. x� SCENARIO 2 applies improved fuel specifications (AFRI-4) and implementation of

stricter auto import measures and requirements for pollution control devices. The reductions in pollution emissions were then used to estimate the associated decrease in air pollution-related health impacts for each representative city, along with the potential value of these health impact reductions. The study results were extrapolated to the regional level, taking into account the urban population in each region. The Health Study results indicated that there is a potential for health benefits in SSA’s urban areas associated with the use of lower sulfur fuels, and that there are significant health benefits if lower sulfur fuels are combined with modern vehicles with pollution control equipment and an inspection and maintenance program. This second, companion study looks at the necessary refining impacts and investment that would be required to comply with AFRI-4 specifications for gasoline and diesel. Costs are developed in terms of both required SSA refinery investments and the delivered costs of petroleum products, i.e., including both regionally produced products and imports to arrive at the total cost of product supplied across each SSA region. The analysis is undertaken setting the SSA regions and refineries in a global context, thereby capturing market interactions, including the interplay between the potential for regional refining expansion versus that for growth of imports to meet rising SSA demand. One 2015 scenario was developed to explore the potential costs and benefits of moving to AFRI-4 by 2015 rather than in 2020 and whether this imposed undue hardships on the SSA refiners. However, the main focus of the work was on 2020. 2020 scenarios were examined with both present day and AFRI-4 specifications in play to enable the incremental cost impacts of moving to AFRI-4 specifications to be assessed. These were then compared with the associated incremental health benefits. In addition, the Refining study assesses the effects of keeping all SSA refineries running in their present form versus allowing full competition with refiners in the Middle East, Asia, and other regions of the world that represent current or potential products suppliers. The effects of competitive conditions both favorable and unfavorable to SSA refiners were assessed; both in terms of impacts on the viability of existing refineries and the potential for



both expansion of regional refineries and construction of new “worldscale” refining complexes

MODEL USED WORLD® is a multi-regional linear programming modeling system that simulates the activities and economics of the world regional and global petroleum industry against short through long-term horizons. The model integrates and captures the interactions between crude supply, non-crude oil supply, refining operations, refining investment, transportation of crude oils, products and intermediates, product blending/quality, and product demand. WORLD® achieves this by combining high level supply / demand / world oil price projections – as from EIA or IEA – with bottom up detail of refining, products, supply and transportation. For the selected horizon, outputs include: refining activities, capacity additions, investments, margins, crude and products trading and crude and products pricing (based on an input marker crude price). Frequently, WORLD® is used to quantify the differential effects of changes from a base case. Full details on the model can be found in Appendix D in Volume II-B. Its 20 year track record includes numerous global analyses for entities ranging from the U.S. Department of Energy, EIA and EPA to the OPEC Secretariat, International Maritime Organization, major and specialty oil companies. With the agreement of the Bank and the ARA Steering Committee the modeling horizons were set at 2010, 2015 and 2020. Stepping the model forward in 5-year increments captures the evolution of product demand and mix in the regions and the advance of the AFRI 1-4 specifications in each refinery subgroup with the attendant costs and impacts. The advance of regional specifications, demand and supply, together with the influences of broader global developments, interact in the model revealing the investments to make in both existing refineries and in terms of new refining centers. Within existing refineries, the investments potentially range from the relatively inexpensive, such as limited desulfurization unit expansion or revamp to high cost investment decisions such as installing a major hydrocracker. Wholly new refining capacity can range from moderate scale local new capacity to large and complex new refining centers. Stepping forward in time increments, with associated product quality, demand and related developments, enables the Steering Committee to examine the economics of the different refinery subgroups and whether or not they can make the investments necessary to meet advancing fuel specifications and to remain profitable and competitive on the world market. The results thus provide the Bank with a framework for potential staging of projects over the next 10 years (to 2020). WORLD® uniquely combines top down global oil supply/demand/price scenarios with rigorous bottom up detail on the world’s refining and supply system. Thus to establish the basis for each study horizon out to 2020, definition of a range of global parameters and detailed premises is required. The main parameters are discussed in this chapter. A full discussion of both the global and SSA parameters can be found in Appendix B in Volume II-B.

WORLD® MODELING CASE STRATEGY The time horizons originally requested for the study were 2010, 2015 and 2020. One scenario (two cases) was developed for 2015 but the main focus was placed on a series of 2020 cases. Exhibit 2-1 shows the main cases.



Exhibit 2-1: Modeling Case Descriptions

Case Description Case No. 2010

2015

2020

Economic Conditions in SSA

2015/2020 AFRI-Current

2015/2020 AFRI-4

2010 Base Case 210 X X 2015 Open Market Case. SSA Refineries in open competition

215 X Unfavorable X

2015 Open Market Case. SSA Refineries in open competition

216 X Unfavorable X

2020 Base Case: All SSA Refineries kept running:

224 X Favorable X

2020 Base Case – All SSA Refineries kept running:

220 X Favorable X

2020 Open Market Case: SSA Refineries in open competition:

221 X Favorable X


222 X Favorable X


223 X Unfavorable X

These cases were carefully constructed so that they not only presented a picture of the SSA refinery industry in 2020 but they allowed various comparisons such as the incremental cost of moving from current fuel specifications to the AFRI-4 specifications, and the cost difference between an open market scenario and a closed, or constrained market, scenario. A number of cases were also run assuming economic conditions unfavorable to SSA. Given the volatility of the global economy this was deemed to be necessary. These cases are described in more detail in Chapters 2, 3, and 4.

ASSUMPTIONS The following sections discuss the assumptions that underlie the modeling efforts: first the global assumptions and then the specific SSA assumptions. There is also a summation of the constraints that were imposed on SSA refineries. The assumptions are presented in general terms in this chapter, but the actual specifics can be found in Appendix B of Volume II-B.

GLOBAL ASSUMPTIONS The petroleum market is global in scope and it is within this market that the SSA refiners operate. Thus the global refining and oil markets outlook is critical to the future of the SSA refiners. Key parameters in the global context are discussed below. They comprise results from the WORLD® model analyses.



The projections show an outlook through 2015 and potentially stretching to 2020 that is relatively slack, this in large part because of the precipitous demand drop caused by the economic crisis; so global demand through 2020 is projected to be lower than was anticipated a year ago. There is “lost demand”, especially in OECD regions. This slackness results from a combination of the major demand drop and at least 4+ million barrels per day (mmb/d) of on going projects. These, combined with recent expansions, include a high proportion of upgrading additions; this in a period when heavy crude supply is dropping and supplies of natural gas liquids (NGLs), condensates and biofuels are rising. These combine to create a forward projection where:

• Refinery margins generally correspond to 2000 – 2003 levels of relative refining slackness with 2010 especially weak;

• The decline in heavy crude production in the short to medium term, allied to current/recent substantial investments in upgrading (HCR, FCC, coking), plus the use in the projections of the International Maritime Organization (IMO) basis for marine fuel demand (which leads to more residual fuel oil in global product by 2015 and 2020) leads to low then gradually expanding residual fuel oil differentials versus crude oil. These however barely surpass the $5-6/bbl levels that obtained in the 2000-2001 period

• The growth in NGLs, condensates and ethanol supplies, together with flat to declining gasoline demand in OECD regions, leads to sustained gasoline weakness and low margins versus crude oil. In Asia/Pacific, and driven by growth there, these return to the roughly $5/bbl level that obtained in the early 2000’s. In the Atlantic basin, they are projected at that level in the shorter term but then are projected to decline to the $1-3/bbl range.6

• Distillates however are projected to resume their role as the key demand growth group as global economic growth, trade, commerce and construction resume, such that further hydrocracking (HCR) capacity beyond current base plus projects continues to be needed over time. This in turn re-establishes and maintains substantial distillate premiums versus crude oil. WORLD® projections allow for catalyst/mode modifications (which are already occurring) on FCC’s to generate less gasoline and more distillate. This potential is secondary relative to HCR but, inter alia it enables the United States to generate more distillate, courtesy of its large FCC base. Part of the distillate is used for export, to SSA as well as to Europe. Overall, projected WORLD® distillate premia versus crude oil return to the $10-20/bbl range that obtained from 2004 through much of 2008

Historical and projected WORLD® differentials versus crude are summarized in the exhibits below. Singapore shows the closest trend back to 2000-2003 levels for gasoline and residual fuel oil versus crude oil. This is because demand in Asia keeps growing and the growth is relatively balanced across all main product types. The U.S. Gulf Coast (USGC) and European differentials more severely reflect the structural imbalance in the major products with gasoline surpluses and distillate tightness. Broadly, gasoline differentials versus crude oil continue their decline that has been evident since around 2005. On economic recovery distillates resume their upward trend that has also been evident in recent years. Because of slack coking/FCC capacity and declining heavy crude production medium term, residual differentials are kept small although slowly re-expanding

6 Note that gasoline margins versus crude oil were negative for some periods during 2008.



Exhibit 2-2: Differentials versus Crude Oil - Singapore

DGR

Sources: History – Bloomberg: Projections - WORLD®

Exhibit 2-3: Differentials versus Crude Oil – N.W. Europe

DGR




Exhibit 2-4: Differentials versus Crude Oil – USGC

D

G

R


EnSys’ just completed Downstream Study as input to the OPEC World Oil Outlook 2009 to be published in late June of 2009 produced very similar projections on differentials. EnSys was at pains to point out in the report though that they believed these differentials are signals and that something may well change, especially to redress the naphtha/gasoline versus distillate imbalance. There may be potential for a partial swing back toward gasoline from diesel in light duty vehicles. Much depends on what happens in China and India; also Europe.7 Beyond that though, EnSys has pointed out that the incentive exists for refinery technology changes that, either directly or indirectly, would condense naphtha to distillate. Old rather unattractive technologies exist that produce distillates by oligomerization of C3 and C4 olefins but new zeolite catalyst variants may hold the promise of more attractive processing and a better quality diesel type product. There is interest among the technology companies that may lead to commercial processes. Overall though, it appears difficult to shift in the short to medium term away from the gasoline/distillate imbalance especially as global trade and commerce slowly recovers, as was projected to happen from 2010 on in the demand outlook used in this study. A key aspect of the global context is that SSA refineries can expect to face substantial competition from product imports throughout the period to 2020. Unless very substantial refinery closures occur in OECD countries, Europe will continue to have a large gasoline surplus; the United States will reduce its gasoline deficit or swing to surplus and will raise its distillate output.8 The Reliance I and

7 Events in the United States will continue the downward pressure on gasoline. By presidential order a joint regulatory ruling by the USEPA and the USDOT is to go into effect in early 2010 through which: DOT will establish the average 35 mpg café standard for the 2015 U.S. fleet, and EPA will establish tailpipe emission standards to control CO2 emissions. 8 A very large unknown is the likely impact of the proposed economy-wide carbon control law under discussion in the United States. A major study that ICF/EnSys conducted for API indicates that the U.S. refining sector will be



All SSA refineries will face considerable global competition in the gasoline and diesel markets out through 2020. To survive SSA refineries must:

• Either be protected, or • Produce gasoline and diesel at

import parity prices.

II and Essar Vadinar refineries are all now on stream, providing a total of 1.5 million b/d of potential product output. Also, this study projects that ARAMCO will proceed with the Jubail and Yanbu projects post-2015. Thus all SSA regional refineries will, unless protected, need to produce products to compete at import parity pricing on gasoline and diesel. Exhibit 2-5 shows the spread between Bonny Light and Brent crude oils, representing one aspect of the projected evolution of crude price differentials per the WORLD® cases, with the focus on Bonny Light as the primary West African marker crude. Up until 2004, there was only a minimal average differential between Brent and Bonny Light FOB prices. Then, as distillate differentials versus gasoline widened and general refinery upgrading tightened, the differentials widened. Actual differentials in the market have narrowed since their peaks in 2008, in line with the general demand collapse which has heavily impacted distillates. The projection is that the differential will stay weak in 2010, although not returning to 2000 – 2003 levels and then gradually widen through 2015 and 2020, driven by distillates demand growth.

Exhibit 2-5: Bonny Light versus Brent Crude oils


severely affected and that product imports into the United States will increase sharply while crude oil imports would decrease. If, in fact, this is the case it may affect the global product markets



SUB-SAHARAN AFRICA ASSUMPTIONS

DEMAND Energy demand within an individual country is largely a function of gross domestic product (GDP), population, and the energy intensity/efficiency of the overall economy and specific sectors within the economy. Demand is also impacted by Government policies that influence the exploitation of domestic natural resources, control imports and/or exports, affect prices in country, and impact the efficiency of energy end-use technologies. Further impact comes from the state of the domestic infrastructure and the percentage of GDP derived from the export of raw commodities9. Using prices to estimate demand is complicated. In an unfettered market, the market clearing price would determine the level of demand by consumers in the different economic sectors. The price elasticity of demand of each consumer or each sector would determine the quantity purchased at any given price. For wealthy countries or groups of wealth consumers, quantity is often determined by the income elasticity as the wealthier one becomes the smaller the proportion of disposable income that is spent on energy. A further complication is in those sectors where alternative forms of energy can be used and demand for each form of energy is determined by the cross price elasticities of each energy mode. While this may be the most rigorous approach to estimating demand substantial amounts of data are required. There is also a good deal of dissension over the correct elasticities to use. Therefore, initially ICF concluded that an accepted publicly available projection would be the best approach. ICF has been unable to find publicly available substantive projections of energy demand by country in SSA. In the various projections, such as those from OPEC, one can find Angola and Nigeria, the major oil producers identified. Other projections will identify South Africa, usually broken out because of the size of its GDP. ICF was unable to find a projection that addressed the major countries in SSA, let alone the smaller countries. In SSA each country has its own price regime and in certain oil producing countries there are also price subsidies. A further complication is that very few countries in SSA, with the exception of South Africa have a mixed industrial economy which works best with the normal analytical approach. Many of the SSA countries have very rapidly growing GDPs driven largely by resource exports during a period when global commodity prices were at an all-time high and this does not translate directly into petroleum demand. ICF has therefore developed the following methodology to project petroleum demand by country out through 2020. This methodology comes with caveats about the quality of the data and with concerns over the impact of the current global recession. The full details of the demand methodology can be found in Appendix A of Volume II-B. Total projected petroleum demand for Africa was based on the projections from the EIA tied to the price projection discussed above. North African demand was subtracted from the totals. The primary source of data for the demand model is the CITAC data base which provides total consumption from 2000 to 2007 for eight petroleum products and the IEA Energy Balances which provides data from 1992 to 2007. The latter is used to extrapolate CITAC data back to 1992 and to fill in certain items missing from the CITAC database such as refinery fuel use. Regressions were then run on the consumption time series to give the trends by product and by sector and to relate the trends to population and GDP

9 There are, of course, impacts from random events that cannot be modeled looking out to the future. These can include war, and extreme climate impacts among others.



Given projected population and GDP from the World Bank, the United Nations, the IMF, and the U.S. Census Bureau trends from the regressions can be then superimposed on the SSA total demand to give estimates of country level demand. While the methodology is analytically reasonable, there may be countries in SSA that are at a threshold for economic takeoff and this methodology would not indicate this. In addition, there is the issue of “pent up” demand. If consumers in a specific country are faced with government regulations that limit the availability of certain products they may consume less than they wish. Likewise if the infrastructure of a country is poor enough to impede distribution consumers will consume less than they demand. If, at some point in the future, the impediment to demand is lifted whether by revising government regulations or by improving the distribution infrastructure there may be a surge in actual consumption as demands are met. This will have to be evaluated by expert judgment. The complications of the demand estimates are fully discussed in Appendix A in Volume II-B. Apart from the specific problems in generating demand projections ICF was faced with the overwhelming problem of the global recession. Since this was a “moving target” ICF, with the concurrence of the World Bank took the approach of deciding on a projection that was lower than trend indicated. These cases are the ones indicated in the report as having economic conditions favorable to SSA. However, to deal with the continuing fall in demand an alternative case was constructed with even lower demand and these became the cases labeled as unfavorable. To some extent these levels are arbitrary; however all international forecasts do indicate that the consensus belief is that the developing nations will recover in a more timely fashion than the developed world and will then proceed to start growing again.

CONSTRAINTS ON SUB-SAHARAN REFINERIES IN WORLD® Exhibit 2-6 summarizes the major constraints that were implemented in WORLD® in regard to SSA. These constraints were put in place with the agreement of the World Bank and the ARA Steering Committee in order to 1) more exactly reflect the reality of the SSA refinery sector, and 2) to allow the construction of the “constrained cases”. In terms of new capacity in 2015 and 2020 the model was allowed to decide whether or not new capacity should be built with two exceptions. With the advent of Ugandan crude oil and the likelihood that more will be discovered and produced it was agreed that a new 50,000 barrels per day (2.5 million tonnes per year) refinery would be built in the Africa East region. This was entered into the model and appears in all the future cases. In the 2020 cases when the model was run with no constraints on new capacity, depending on the case, it built anywhere from 400,000 to 600,000 barrels per day of new capacity in the Africa West region. We are implicitly including in this Angola despite the fact that the country is included in Africa South. However, given the impact of the global recession and the uncertainties about the timing and the outcome of recovery it was decided to be conservative for the 2020 period and a cap of 200,000 barrels per day (10 million tonnes per year) was placed on all the cases.



Exhibit 2-6: Model Constraints

Activity Constraint Refinery capacity Capacities established for 2008 are used in the study with limited

expansion through revamping and debottlenecking allowed for 2010 and later cases. Late in the analysis we became aware of some new debottlenecking projects that have begun but they were not been added in. We do not believe they would change the outcome of the cases.

Refinery projects Following the model protocol, only new projects that are under construction were allowed. None of the planned projects was added to the SSA database. This does not preclude the model from adding capacity in the future cases

Refinery activity Existing refineries continue to operate at Base Case efficiencies, i.e. with an upper cap on utilization: new refineries have high efficiencies. Nigerian refineries were tightly constrained as their average 7-year utilization between 2001 and 2007 was 32% with the highest level being 47% in 2001.

New refinery capacity Africa East: a new 50 mb/d refinery is entered for all 2015 and 2020 cases. (This was set to run emerging Uganda crude oil.) Africa West: a cap of 200 mb/d is imposed in all 2015 and 2020 cases

Process units In Nigeria it was assumed that the alkylation units would not run at any time

Refineries In the constrained cases, all existing SSA refineries were forced to run; in open market cases, existing refineries had flexibility over throughput rates. In all cases, the inland Zambia refinery was forced to run to supply fuel to the mining industries with a floor of 29%

Crude oil slates In the 2020 constrained cases SSA refineries are required to use the same crude oil slates as in the Base Case In the open market cases some flexibility is allowed.

Trade In all cases the export of high sulfur distillate is not allowed. Trade in intermediate products is allowed but is constrained. Exports of benzene are allowed but imports are constrained. Imports of MTBE are constrained but some imports of ethanol are allowed.

Infrastructure Incremental infrastructure capacity and costs at ports and in the consumer distribution system because of increased imports were not included in the model: incremental capacity and costs for all refinery offsites was included.

SSA PETROLEUM PRODUCT SPECIFICATIONS One goal of the modeling effort in this study was to assess the investment requirements facing the individual SSA refineries if they are to move along the AFRI standards. It became clear during the initial Kick Off meeting that, at least as far as gasoline and diesel are concerned, that there are a number of fuel specifications: “Official specifications” (maximum specifications allowed by the government); and “import specifications”. In countries without refineries import specifications may be the same as official specifications, but in other countries with refineries governments may specify/allow a different specification with a view to blending with local production. . Exhibits 2-7 through 2-10 show for both gasoline and diesel official government specifications and estimates of what actually reaches the marketplace.



The maps show a vast difference between the official specifications and the estimated actual qualities, particularly for gasoline. Knowledge of the actual qualities is critical for the modeling. As, in fact, SSA refineries are already making, for example, gasoline at the AFRI-3 level, that changes the whole investment picture. It was initially thought costs would be based on moving from mainly AFRI-1 to AFRI-4. Based on the current qualities identified, the costs relate more to moving from AFRI-2 and 3 to AFRI-4. When this became apparent ICF requested through CITAC detailed information on both domestic and imported gasoline and diesel from all the SSA refineries. We have received detailed information on domestic production from all the SSA refineries. We have received only limited information on the imports, so we have proceeded in the modeling exercise using CITAC’s estimates on imports.

Exhibit 2-7: Gasoline Official Government Specifications in Africa




Exhibit 2-8: Estimated Marketplace Gasoline Actual Qualities (Domestic and Imported




Exhibit 2-9: Gasoil Official Government Specifications in Africa




Exhibit 2-10: Estimated Marketplace Gasoil Actual Qualities (Domestic and Imported)

Source: CITAC Africa LLC MECHANISMS FOR ACHIEVING AFRI-4 STANDARDS A central focus of the study is on how, and at what investment costs and changes in supply cost, the SSA and global refining system can produce SSA gasoline and diesel to AFRI standards. Here, as elsewhere in the study, it was necessary to set premises which we felt would lead to a realistic assessment of costs. Sulfur A primary thrust of the AFRI-4 specifications is sulfur reduction, to 150 ppm for gasoline and 50 ppm for diesel. The WORLD® cases therefore allowed for additions to desulfurization capacity, notably distillate deep desulfurization and FCC gasoline desulfurization. Certain SSA refineries, especially in West Africa, enjoy the benefit of processing low sulfur crude oils. Refineries in Africa South and East process mainly sour crude oils but those in the country of South Africa especially are already mainly at AFRI-3 standards and have extensive distillate desulfurization capacity. The South Africa refineries in particular were allowed to undertake a limited degree of revamping of existing



distillate desulfurization units to ultra low sulfur standards. Other refineries were mainly assessed as being required to add new capacity and to operate those new units at the general level of efficiency (utilization) of the refinery, based on its recent history. Particularly outside the country of South Africa, most SSA refineries possess limited or no FCC capacity and therefore they do not have the high sulfur contribution to gasoline that can result. These factors influenced the extent of required desulfurization capacity additions in the AFRI-4 cases. In the constrained cases, all SSA refineries were projected as continuing to run at essentially today’s throughputs and with essentially today’s crude slates. In the open market AFRI-4 cases, SSA refineries were allowed some degree of increased crude slate flexibility where this was deemed plausible. Thus there was some degree of option to switch to better quality crude when faced with tighter sulfur specifications for gasoline and distillate. Ability to switch to a better quality crude would have tended to somewhat reduce refinery investment but all factors – SSA refinery investments and operational / feed changes plus imports – acted to change the costs at which the SSA gasoline and diesel were delivered. Benzene A second major thrust of the AFRI-4 standards is benzene reduction (to 1% maximum) in gasoline. WORLD® allows for various means to achieve this. These include modifying operations on catalytic reformers and extracting benzene from the reformate product from catalytic reforming. In the cases, refinery operational and process changes were allowed. Benzene extraction and export was also allowed for. Admittedly, that could require modifications to storage and shipping facilities at SSA refineries but benzene extraction is a well established route and there is an extensive international BTX market which is embodied in WORLD®. In addition, delegates from Nigeria pointed out that that country is currently in benzene deficit and imports cyclohexane as a solvent for use in polypropylene manufacture. Thus, although imports are not allowed for in the cases, domestic regional opportunities for benzene consumption may exist or evolve. Reduction of benzene – and sulfur – can also be achieved by using blendstocks that contain little or no content of these. In addition, benzene is high octane and therefore its removal can call for replacement with another high octane stream. In early WORLD® model AFRI-4 cases, SSA refineries were shown as importing moderate volumes of MTBE. This may be a plausible option assuming MTBE continues to be allowed in SSA countries as a gasoline component. Exports of the stream are available, for instance from Venezuela, the Middle East and also the United States now that MTBE has been removed from gasoline there because of groundwater problems. Partly because of the small shipment scale of any potential MTBE imports and partly because of the uncertainties surrounding the desirability of MTBE as a gasoline component, the ARA Steering Committee agreed to remove MTBE as a possible mechanism for AFRI-4 compliance. What was allowed was ethanol. In fact, small volumes of ethanol were used in the AFRI-4 cases. The levels, up to only 3,000 b/d, were considered small enough not to distort the assessed costs to SSA refineries and regions. Indeed, the option was left open as it shows a potential synergy between the move to AFRI-4 and the desirability of producing (or importing) a biofuel that can dilute sulfur and benzene and replace octane.

Volume II-A: Final Refinery Study Report Base Case and the 2015 Cases


A major change was made in one of the underlying assumptions Consensus emerged in London that the SSA capital costs were too low Therefore: SSA capital costs were raised by 25 % in all future cases

3: THE BASE CASE AND THE 2015 CASES

As a result of meetings held in London at the beginning of May 2009 with the World Bank, the ARA Steering Committee, and with individual refineries, a number of additions and changes were made to the modeling. Two 2015 cases were added: the first looks at 2015 assuming that the current specifications are kept; while the second case looks at the costs of moving to the AFRI-4 specifications in 2015. In both the 2015 cases the assumption was that of an open market and unfavorable economic conditions for SSA. These cases were added to evaluate whether or not there were major benefits from moving more quickly to the AFRI-4 fuel standards. As a result of the May discussions, a consensus emerged among all participants that the capital costs used for SSA had been somewhat understated. Therefore all the WORLD® cases were rerun using the new, increased capital costs. SSA regional costs were increased by of the order of 25%. At the same meeting it was pointed out that while the total investment costs included all offsites at the refineries, costs were not included for expanding non-refinery port and terminal facilities to cope with increased imports. The Steering Committee and the World Bank accepted this. In addition, given the deterioration of the global economies the 2015 cases were run assuming unfavorable economic conditions for SSA with the resulting reduced demand. At the same time, the 2010 Base Case was rerun somewhat reducing demand in SSA for that year. This allowed a smoother, more credible evolution of demand from 2010 to 2015 to 2020 under unfavorable conditions.

WORLD® MODEL BASE CASE RESULTS The Base Case year selected for the modeling effort is 2010, essentially the current period. This case is run as a “short term” case, i.e., no open investment is allowed and total capacity in each refining region worldwide is equal to the January 2008 base capacity plus allowed projects estimated to be online during 2010. This brings on line some 3.86 mmb/d of new capacity worldwide by 2010 through major projects and debottlenecking, including the Reliance II refinery at Jamnagar, India.

REFINERY CONFIGURATIONS AND NAMEPLATE CAPACITY The list of current existing SSA refineries and their capacities was discussed and agreed on at the initial Kick-off meeting for the project with the World Bank and the ARA Steering Committee in London. Considerable time was devoted to arriving at an accurate depiction of refinery capacity. The configuration of the individual refineries was also discussed and the results of the Steering Committee meeting were further clarified by flow diagrams which some of the individual refineries provided us with10. The result was “best estimates” of the nameplate capacities for all major units at each of the existing refineries. Exhibit 3-1 shows the summary SSA refineries that were entered into

10 CITAC obtained and supplied ICF/EnSys with process flow diagrams for six existing SSA refineries and for the Sonangol Lobito project. The diagrams were useful to confirm overall configuration but most did not contain any capacity data which therefore still had to be separately obtained or estimated.



WORLD®. ICF/EnSys is aware of a number of debottlenecking projects that are in process at some of the SAA refineries, but given the time constraints in finalizing the report they were not added to the model. WORLD® follows a particular protocol in adding proposed and likely projects to the base capacity. Projects are generally not added unless they are either under construction or are under engineering and investment dollars are present. In the current environment of a global recession project additions have been further constrained to only those projects that are actually under construction. Thus in SSA at the time the model was configured there were no refinery projects under construction and so none were added to SSA base capacity. Some revamping and debottlenecking is allowed and the SSA refineries continue to run at levels close to historical actual runs with crude oil slates also close to historical actual slates under base/constrained cases. The full capacities for 2008 are shown in Exhibit 3-2 below. Exhibit 3-3 and Exhibit 3-4 show the allowed revamping and debottlenecking in catalytic reforming and catalytic cracking in Africa South and Africa West and the attendant investment costs. The full details of the runs for the Base Case can be found in Appendix C of Volume II-B. The Base Case provides the underpinning for the 2015 cases and for all the 2020 scenarios.



Exhibit 3-1: Base Case Sub-Saharan Africa Refineries, 2008

0 - 39,000 40,000 - 100,000

>100,000

(FCC/HCR/VBR)

cat reforming

alkylation/ poly / isom

jet/kero / diesel /

VGO/FCC / resid

sulfur recovery

aromatics/ lubes / asphalt

Country WORLD Region Company Location Region CrudeSenegal Africa West Ste. Africaine de Raffinage M’Bao (Dakar) AF 25,030 small no yes no no no noGhana Africa West Tema Oil Refinery Co. Ltd. Tema AF 45,000 medium yes no no yes no noIvory Coast Africa West Societe Ivoirienne de Raffinage Abidjan AF 63,990 medium yes yes no yes no yesIvory Coast Africa West Societe Multinationale des Bitumes Abidjan AF 10,000 small no no no no no yesCameroon Africa West Societe Nationale de Raffinage Cape Limboh Limbe AF 47,110 medium no yes no yes no noNigeria (Kaduna) Africa West Kaduna Refinery & Petrochemical Co. (NNPC) Kaduna AF 110,000 large yes yes no yes no yesNigeria Africa West Port Harcourt Refining Co. (NNPC) Rivers State AF 210,000 large yes yes yes yes no noNigeria Africa West Warri Refinery & Petrochemical Co. (NNPC) Warri AF 125,000 large yes yes yes yes no noCongo, Republic of Africa West Coraf Pointe-Noire AF 21,000 small yes yes no yes no noGabon Africa West Ste. Gabonaise de Raffinage Port Gentil AF 24,000 small yes yes no yes no noAngola Africa South Fina Petroleos de Angola Luanda AF 53,000 medium no yes no yes no yesSouth Africa Africa South National Petroleum Refiners of South Africa Pty Ltd.Sasolburg AF 87,547 medium yes yes yes yes yes noSouth Africa Africa South Caltex Oil SA Cape Town AF 110,000 large yes yes yes yes yes noSouth Africa Africa South Engen Petroleum Ltd. Durban AF 118,750 large yes yes yes yes yes yesSouth Africa Africa South Shell and BP PLC Petroleum Refineries Pty. Ltd. Durban AF 169,000 large yes yes yes yes yes yesZambia (inland) Africa East Indeni Petroleum Refinery Co. Ltd. Bwana Nkubwa Area, Ndola AF 23,750 small no yes no yes no yesKenya Africa East Kenya Petroleum Refineries Ltd. Mombasa AF 90,000 medium no yes no yes no yesSudan (inland) Africa East El Obeid Refinery El Obeid AF 10,000 small TBA YTBA TBA yes TBA TBASudan (inland) Africa East China National Petroleum Corp. El-Gily (Khartoum) AF 110,000 large yes yes no yes yes no

1,453,177

ProductsSouth Africa Sasol Synthetic Fuels: CTL AF 160,000 South Africa PetraSa: GTL AF 50,000

Source: CITAC and the ARA Steering Committee



Exhibit 3-2: Base Case 210: Detailed Sub-Saharan Africa Refinery Capacities, 2008 Million tonnes per year

REFINERY BASE CAPACITIES Case: 2010: - BASE Crude Forced million tonnes per yearJanuary 2008 Capacity BasisUnits are million tonnes per year unless otherwise stated

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWAtmospheric crude unit 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00Vacuum distillation unit 19.81 8.18 9.52 2.11 1.56 0.00 6.22 0.40 0.00 0.13 9.39 0.00 0.11 0.09 1.91 0.00Coking 3.34 0.00 1.34 2.00 0.00 0.00 0.00 0.00 0.00 0.00 1.34 0.00 0.00 0.00 2.00 0.00Visbreaking / Thermal 3.88 0.46 2.92 0.50 0.00 0.00 0.00 0.46 0.00 0.00 2.92 0.00 0.00 0.00 0.50 0.00FCC 11.71 4.71 5.20 1.80 0.58 0.00 4.14 0.00 0.00 0.00 5.20 0.00 0.00 0.00 1.80 0.00Hydro-cracking 1.41 0.82 0.59 0.00 0.72 0.00 0.00 0.10 0.00 0.00 0.59 0.00 0.00 0.00 0.00 0.00Catalytic reforming 11.53 4.92 4.05 2.57 0.70 0.55 3.50 0.17 0.00 0.19 3.86 0.00 0.27 0.70 1.60 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Naphtha desulfurization 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00FCC gasoline desulfurization 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Distillate desulfurization 12.24 3.73 5.69 2.83 1.20 0.18 1.94 0.40 0.00 0.14 5.55 0.00 0.43 1.10 1.30 0.00VGC / FCC feed desulfurization 0.50 0.00 0.00 0.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.50 0.00Resid desulfurization 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Hydrogen plant (million SCFD) 52.10 23.00 29.10 0.00 23 0 0 0 0 0 29 0 0 0 0 0Sulfur plant (tonnes per day) 724 2 622 100 2 0 0 0 0 0 622 0 0 0 100 0

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Alkylation 0.96 0.49 0.46 0.00 0.00 0.00 0.49 0.00 0.00 0.00 0.46 0.00 0.00 0.00 0.00 0.00Polymerization 0.40 0.11 0.29 0.00 0.00 0.00 0.11 0.00 0.00 0.00 0.29 0.00 0.00 0.00 0.00 0.00Aromatics Recovery 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Isomerization 0.76 0.18 0.58 0.00 0.00 0.00 0.18 0.00 0.00 0.00 0.58 0.00 0.00 0.00 0.00 0.00Etherification 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Lubes production 0.77 0.19 0.57 0.00 0.00 0.00 0.19 0.00 0.00 0.00 0.57 0.00 0.00 0.00 0.00 0.00Coke production (tonnes/day) 780 0 240 540 0 0 0 0 0 0 240 0 0 0 540 0Asphalt production 2.23 1.46 0.45 0.33 0.72 0.00 0.74 0.00 0.00 0.05 0.40 0.00 0.28 0.05 0.00 0.00

Source: WORLD® runs, May 17th, 2009



Exhibit 3-3: Base Case 210: Revamping and Debottlenecking Million tonnes per year

FURTHER REFINERY CAPACITY ADDITIONS BY WORLD (OVER AND ABOVE CAPACITY BASE + PROJECTS ASSESSED TO BE ON-STREAM) million tonnes per year

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWUnits are million tonnes per year unless otherwise stated

CAT REF HP TO CCR 0.684 0.000 0.684 0.000 0.684DDS CONV TO LSD 0.000DDS CONV TO ULSD 0.000 0.000 0.000 0.000LSD TO ULSD 0.000 0.000 0.000 0.000LSD TO ULS+AD 0.000 0.000 0.000 0.000MTBE TO ISO-OCTANE 0.000

CRUDE ATMOSPHERIC 0.000 0.000 0.000 0.000VACUUM DISTILLATION 0.000 0.000 0.000 0.000CAT CRACKING 0.046 0.046 0.000 0.000 0.046HYDROCRACKING 0.000 0.000 0.000 0.000DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000

REVAMPING OF ONE UNIT TYPE TO ANOTHER

DEBOTTLENECKING - LOW COST CAPACITY EXPANSIONS


Exhibit 3-4: Base Case 210: Investment Costs $2007 Billions

INVESTMENTS ASSOCIATED WITH REVAMP, DEBOTTLENECKING AND FULL COST CAPACITY ADDITIONS FROM WORLD (OVER AND ABOVE ALLOWED PROJECTS) $(2007) BILLIONSSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEW

REVAMP 0.05$ -$ 0.05$ -$ 0.05$ DEBOTTLENECKING 0.01$ 0.01$ -$ -$ 0.01$ MAJOR NEW UNITS -$ -$ -$ -$ TOTAL REFINING 0.06$ 0.01$ 0.05$ -$ 0.01$ 0.05$

REFINING




New Capacity Capacity shown under the West, East, and South “New” slots in the tables in all cases could be a new refinery or an expansion at an existing refinery or some combination of the two.

2015 Impact Both 2015 cases show that SSA small, old refineries have trouble competing with imports whether or not they move to the AFRI-4 standards.

WORLD® MODEL 2015 CASES RESULTS

CURRENT FUEL SPECIFICATIONS IN 2015: WORLD® CASE 215 Two 2015 cases were developed and run to examine the relative costs and benefits of moving to AFRI-4 in a shorter time period. Certain assumptions were made concerning these cases. One significant change was that when the demand for 2015 was scaled back to represent an economically unfavorable scenario for SSA a numerical disconnect appeared between the demand in the Base Case (2010) and the 2015 Cases. After some discussion between ICF and EnSys it was decided to scale back slightly the SSA demand level in the Base Case so that the move from 2010 to 2015 and then 2020 would flow more smoothly in terms of regional demand growth. Given the global recession the underlying economic assumptions for the 2015 cases were that the economic situation was unfavorable to the SSA refineries. We also assumed an open market, i.e. SSA refineries were not sustained at current crude input rates and qualities. The first 2015 case, Case 215, assumes that the current fuel standards will be applicable in 2015. Growth is driven by the normal expansion of population and other factors. Exhibit 3-5 shows the growth in capacity of the SSA refineries between 2010 and 2015 based on normal demand growth albeit in unfavorable economic conditions. As can be seen there is some revamping in South Africa (2.055 million tonnes per year), but no where else. New capacity is largely concentrated in Africa East. A 50 mb/d (2.5 mmt/y) new refinery was entered into the model to reflect the growing volumes of Ugandan crude oil expected to enter the market. This refinery appears in all the 2015 and 2020 cases. There is some expansion of vacuum distillation and sulfur plants in Africa West, and some expansion of FCC gasoline desulfurization in South Africa. Africa East sees an expansion in coking , FCC, distillate desulfurization, and sulfur plants. Exhibit 3-6 summarizes the expansions

and also shows the estimated refinery utilization. What is shown clearly is that the small older refineries that are already having problems are faced with greater difficulties, even at current specifications, when they have to compete with imports. As the exhibit shows utilization for Congo/Gabon, Angola and Kenya falls precipitously.

Exhibit 3-7 shows the capital investment required for these expansions (($1.89 billion). The lower part of the exhibit puts the SSA investment in the global context ($1.89 billion out of a total $56.1 billion). Exhibits 3-8 and 3-9 show SSA refinery product production and refinery yields and refinery fuel use and loss. Exhibits 3-10 and 3-11 show world trade in gasoline and diesel and how imports and exports affect the SSA refiners. Similar tables for all other products may be found in Appendix C of Volume II-B. Gasoline continues to come to Africa West from Europe in the amount of 187 thousand barrels per day (187 Mb/d). Both Africa South and Africa East receive gasoline imports from the large export refineries in the Middle East and India: 19 mb/d and 11 mb/d respectively. Both Africa West and Africa South export gasoline to other SSA areas and to the Americas.



Distillates movements are somewhat different. Exports are only seen between the SSA regions. The model does constrain the export of distillates from SSA by generally disallowing the export of any high sulfur distillate11. West Africa receives imports from the United States12 and secondarily Europe (note the previous discussion on the gasoline/distillate imbalance), while both Africa South and Africa East receive imports from the Middle East and Asia. The overall total product balances and deficits and surpluses are shown in Exhibit 3-12. Looking at the lower part of Exhibit 3-12 Africa East is dominated by imports: the upper part of the exhibit shows minimal exports. Africa South maintains a vigorous export trade both with other regions of SSA and elsewhere and the only product category in which imports dominate is gasoline. Both gasoline and distillates imports dominate any exports in Africa West, although the region has a strong export trade in the other products. The final exhibit from the run, Exhibit 3-13 shows estimated SSA finished product supply costs for this case and the lower part of the exhibit shows estimated spreads versus crude oils and crack spreads. Costs are in millions of 2007 dollars. The strength of the diesel market can be seen in all of the major markets.

11 SSA refineries are allowed to produce marine distillate and intermediate fuels while recognizing that those fuels will mainly be consumed either in offshore oil and gas production facilities or in international trade. 12 We are assuming the large Middle East export refineries which are on hold currently will come on line post 2015.



Exhibit 3-5: 2015 Case 215: Incremental Capacity Requirements (Current Fuel Specifications) Million tonnes per year




CRUDE ATMOSPHERIC 0.000 0.000 0.000 0.000VACUUM DISTILLATION 0.000 0.000 0.000 0.000CAT CRACKING 0.000 0.000 0.000 0.000HYDROCRACKING 0.000 0.000 0.000 0.000DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000

Units are million tonnes per year unless otherwise statedSSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEW

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Atmospheric crude unit 2.501 0.000 0.000 2.501 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.001 2.500Vacuum distillation unit 0.489 0.007 0.000 0.483 0.000 0.007 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.483Coking 0.102 0.000 0.000 0.102 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.102Visbreaking / Thermal 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000FCC 1.651 0.000 0.000 1.651 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.651Hydro-cracking 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Catalytic reforming 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Naphtha desulfurization 0.036 0.000 0.000 0.036 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.036 0.000 0.000 0.000FCC gasoline desulfurization 0.172 0.000 0.170 0.002 0.000 0.000 0.000 0.000 0.000 0.000 0.170 0.000 0.000 0.000 0.002 0.000Distillate desulfurization 1.001 0.000 0.000 1.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.485 0.516VGO / FCC feed desulfurization 0.009 0.000 0.000 0.009 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.009Resid desulfurization 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Hydrogen plant (million SCFD) 8.8 0.0 0.0 8.8 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 8.841Sulfur plant (tonnes per day) 30 10 0 20 10.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 10.000 0.000 0.000 10.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Alkylation 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Polymerization 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Aromatics Recovery 0.051 0.000 0.000 0.051 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.051 0.000Isomerization 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000DIPE/Iso-octane/MTBE 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Lubes production 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000



FULL COST NEW CAPACITY




Exhibit 3-6: 2015 Case 215: SSA Refinery Capacity and Throughput (Current Fuel Specifications) Million tonnes per year

REFINERY CAPACITY & THROUGHPUT SUMMARY million tonnes per year

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEW

BASE CAPACITY 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00FIRM CONSTRUCTION 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00DEBOTTLENECKING ADDITIONS 0.00 0.00 0.00 0.00MAJOR NEW UNIT ADDITIONS 2.50 0.00 0.00 2.50 0.00 2.50TOTAL ADDITIONS OVER BASE 2.50 0.00 0.00 2.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.50TOTAL BASE + ADDITIONS 2015 75.16 34.06 26.91 14.19 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 2.50

0.00 0.00 0.00 0.00TOTAL CRUDE CAPACITY USED 2015 47.25 16.96 22.02 8.27 6.12 2.14 8.70 0.19 21.83 0.40 0.52 5.10 2.25Refinery Utilisation 63% 50% 82% 58% 85% 91% 39% 7% 90% 34% 12% 85% 90% Source: WORLD® runs, May 17th, 2009



Exhibit 3-7: 2015 Case 215: Incremental Investment Costs (Current Fuel Specifications) $(2007) Billions


REVAMP 0.26$ -$ 0.26$ -$ 0.26$ DEBOTTLENECKING -$ -$ -$ -$ MAJOR NEW UNITS 1.64$ 0.02$ 0.02$ 1.60$ 0.01$ 0.00$ 0.00$ 0.00$ 0.02$ 0.02$ 0.09$ 1.49$ TOTAL REFINING 1.89$ 0.02$ 0.28$ 1.60$ 0.01$ 0.00$ 0.00$ 0.00$ 0.28$ 0.02$ 0.09$ 1.49$

SUMMARY SSA AND GLOBAL REFINING INVESTMENTS AND EXPANSIONS $(2007) BILLION

NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA

Total Distillation Capacity Additions by Model 0.050 0.075 0.000 1.429 1.553 1.553above Base plus Firm Construction includes minor debottlenecking as well as major projectsmillion bpcd

Total Refining Investment by Model 1.9$ 17.9$ 14.6$ 21.6$ 56.1$ 56.1$ above Base plus Firm Construction includes minor debottlenecking as well as major projects$(2007) billionAVERAGE $/BBL NEW ACU CAPACITY 37,891$ 240,151$ n.a. 15,132$ 36,100$

REFINING

SSA TOTAL

OTHER WORLD REGIONSGLOBAL

TOTALcheck




Exhibit 3-8: 2015 Case 215: SSA Refinery Product Production and Yields (Current Fuel Specifications) Million tonnes per year

REFINERY PRODUCT PRODUCTION Case: 2015: - Un-Favorable Open Market Current million tonnes per yearG H I J W K D E O P Q Y

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWLPGs (includes LPG & propylene) 1.386 0.362 0.662 0.362 0.122 0.011 0.230 0.000 0.000 0.002 0.660 0.000 0.002 0.005 0.222 0.133Naphthas (including White Spirits & Solvents) 0.842 0.683 0.067 0.091 0.212 0.086 0.386 0.000 0.000 0.004 0.063 0.000 0.046 0.021 0.000 0.025Gasoline 9.931 2.827 5.512 1.592 0.813 0.114 1.901 0.000 0.000 0.016 5.496 0.000 0.012 0.039 0.849 0.692of which 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000- Reformulated 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000- Conventional 10.063 2.959 5.512 1.592 0.852 0.113 1.994 0.000 0.000 0.016 5.496 0.000 0.012 0.039 0.849 0.692Aromatics 0.042 0.000 0.000 0.042 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.042 0.000Jet/Kerosene 7.074 2.607 4.450 0.018 1.453 0.227 0.927 0.000 0.000 0.022 4.427 0.000 0.000 0.018 0.000 0.000Gasoil/Diesel 14.780 4.869 5.958 3.953 1.072 0.304 3.493 0.000 0.000 0.027 5.931 0.000 0.138 0.099 2.822 0.893of which 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000- Ultra-low Sulfur 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000- Low Sulfur 0.077 0.000 0.077 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.077 0.000 0.000 0.000 0.000 0.000- High Sulfur 9.179 4.215 1.110 3.854 0.720 0.304 3.191 0.000 0.000 0.000 1.110 0.000 0.138 0.000 2.822 0.893- Distillate Bunkers (MGO, MDO) 1.815 0.654 1.062 0.099 0.352 0.000 0.302 0.000 0.000 0.025 1.037 0.000 0.000 0.099 0.000 0.000Residual Fuels 7.129 4.294 1.406 1.429 2.201 1.402 0.690 0.000 0.000 0.120 1.287 0.000 0.179 0.330 0.639 0.281of which 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000- Low Sulfur 4.826 3.234 0.753 0.839 1.984 0.627 0.623 0.000 0.000 0.099 0.654 0.000 0.009 0.000 0.576 0.253- High Sulfur 0.609 0.000 0.160 0.449 0.000 0.000 0.000 0.000 0.000 0.009 0.152 0.000 0.152 0.297 0.000 0.000- Bunkers (IFO 180/380) 1.226 0.825 0.401 0.000 0.000 0.695 0.130 0.000 0.000 0.000 0.401 0.000 0.000 0.000 0.000 0.000Lubes & Waxes 0.476 0.000 0.476 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.476 0.000 0.000 0.000 0.000 0.000Bitumen 0.402 0.000 0.402 0.000 0.000 0.000 0.000 0.000 0.000 0.402 0.000 0.000 0.000 0.000 0.000Petroleum Coke 0.082 0.000 0.048 0.000 0.000 0.000 0.000 0.000 0.000 0.048 0.000 0.000 0.000 0.029 0.005Other 0.485 0.062 0.392 0.030 0.000 0.000 0.062 0.000 0.000 0.000 0.392 0.000 0.002 0.003 0.001 0.025

TOTAL 42.629 15.704 19.374 7.516 5.872 2.143 7.689 0.000 0.000 0.191 19.183 0.000 0.378 0.515 4.603 2.054

Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWWeght %LPGs (includes LPG & propylene) 3.3% 2.3% 3.4% 4.8% 2.1% 0.5% 3.0% 1.2% 3.4% 0.5% 1.0% 4.8% 6.5%Naphthas (including White Spirits & Solvents) 2.0% 4.4% 0.3% 1.2% 3.6% 4.0% 5.0% 2.1% 0.3% 12.0% 4.0% 0.0% 1.2%Gasoline 23.3% 18.0% 28.5% 21.2% 13.8% 5.3% 24.7% 8.3% 28.7% 3.2% 7.6% 18.4% 33.7%Aromatics 0.1% 0.0% 0.0% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.9% 0.0%Jet/Kerosene 16.6% 16.6% 23.0% 0.2% 24.7% 10.6% 12.1% 11.8% 23.1% 0.0% 3.4% 0.0% 0.0%Gasoil/Diesel 34.7% 31.0% 30.8% 52.6% 18.3% 14.2% 45.4% 14.1% 30.9% 36.5% 19.3% 61.3% 43.5%Residual Fuels 16.7% 27.3% 7.3% 19.0% 37.5% 65.4% 9.0% 62.6% 6.7% 47.4% 64.0% 13.9% 13.7%Lubes & Waxes 1.1% 0.0% 2.5% 0.0% 0.0% 0.0% 0.0% 0.0% 2.5% 0.0% 0.0% 0.0% 0.0%Bitumen 0.9% 0.0% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0% 2.1% 0.0% 0.0% 0.0% 0.0%Petroleum Coke 0.2% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.0% 0.6% 0.3%Other 1.1% 0.4% 2.0% 0.4% 0.0% 0.0% 0.8% 0.0% 2.0% 0.4% 0.6% 0.0% 1.2%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 100.0% 100.0% 0.0% 100.0% 100.0% 100.0% 100.0% Source: WORLD® runs, May 17th, 2009



Exhibit 3-9: 2015 Case 215: SSA Refinery Fuel and Losses (Current Fuel Specifications)

Million tonnes per year REFINERY FUEL & LOSS Case: 2015: - Un-Favorable Open Market Current million tonnes per year

G H I J W K D E O P Q Y

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWNatural Gas (Purchased) 0.035 0.035 0.000 0.000 0.035 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Still Gas (FOE) 0.799 0.124 0.506 0.169 0.061 0.012 0.052 0.000 0.000 0.002 0.505 0.000 0.000 0.001 0.124 0.045Hydrogen (FOE) 0.011 0.009 0.000 0.003 0.000 0.002 0.007 0.000 0.000 0.000 0.000 0.000 0.000 0.001 0.002 0.000Hydrogen Sulfide (FOE) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000C3s C4s 0.125 0.043 0.069 0.014 0.013 0.003 0.027 0.000 0.000 0.001 0.069 0.000 0.001 0.001 0.012 0.000Residual Fuel 2.391 0.885 1.205 0.302 0.223 0.062 0.600 0.000 0.000 0.006 1.199 0.000 0.018 0.018 0.179 0.087Other Streams 0.145 0.049 0.080 0.016 0.015 0.004 0.031 0.000 0.000 0.001 0.080 0.000 0.001 0.001 0.014 0.000FCC Coke 0.402 0.066 0.190 0.146 0.017 0.000 0.050 0.000 0.000 0.000 0.190 0.000 0.000 0.000 0.080 0.066Fuel Losses 0.402 0.282 0.086 0.035 0.034 0.005 0.244 0.001 0.085 0.003 0.003 0.027 0.003Evap/Other Losses 0.236 0.085 0.110 0.041 0.031 0.011 0.044 0.000 0.000 0.001 0.109 0.000 0.002 0.003 0.026 0.011Other losses 0.638 0.366 0.196 0.076 0.064 0.015 0.287 0.000 0.000 0.002 0.194 0.000 0.005 0.006 0.052 0.014Total 4.545 1.575 2.245 0.724 0.427 0.097 1.052 0.000 0.000 0.010 2.235 0.000 0.025 0.027 0.462 0.211Check 4.545 1.575 2.245 0.724 0.427 0.097 1.052 0.000 0.000 0.010 2.235 0.000 0.025 0.027 0.462 0.211

Fuel & Loss as Percent on Crude Run 9.6% 9.3% 10.2% 8.8% 7.0% 4.5% 12.1% 0.0% 0.0% 5.4% 10.2% 0.0% 6.1% 5.1% 9.1% 9.4% Source: WORLD® runs, May 17th, 2009



Exhibit 3-10: 2015 Case 215: SSA Gasoline production and Trade (Current Fuel Specifications) Million barrels per day

REFINERY PRODUCTION million bpd

WO

RLD

T

OT

AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

A

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA

WEST AFRICA 0.066 0.002 0.063 0.000 0.000 0.000 0.000 0.000AW-SGI 0.019 0.002 0.017 0.000 0.000 0.000 0.000 0.000AW-CAM 0.003 0.000 0.003 0.000 0.000 0.000 0.000 0.000AW-NIG 0.044 0.000 0.044 0.000 0.000 0.000 0.000 0.000AW-COG 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000AW-NEW 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

SOUTH AFRICA 0.127 0.013 0.001 0.111 0.002 0.000 0.000 0.000AS-ANG 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000AS-Saf 0.127 0.013 0.001 0.111 0.002 0.000 0.000 0.000AS-NEW 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

EAST AFRICA 0.037 0.000 0.000 0.000 0.037 0.000 0.000 0.000AE-ZAM 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000AE-KEN 0.001 0.000 0.000 0.000 0.001 0.000 0.000 0.000AE-SUD 0.020 0.000 0.000 0.000 0.020 0.000 0.000 0.000AE-NEW 0.016 0.000 0.000 0.000 0.016 0.000 0.000 0.000

NORTH & SOUTH AMERICA 10.536 10.502 0.000 0.000 0.000 0.000 0.000 0.034EUROPE / MED / FSU 5.087 0.807 0.187 0.009 0.011 4.029 0.042 0.002MIDDLE EAST / ASIA 6.415 0.074 0.000 0.019 0.011 0.000 1.185 5.126

YANBU / RELIANCE 0.564 0.074 0.000 0.012 0.011 0.000 0.251 0.216OTHER ME / ASIA 5.851 0.000 0.000 0.007 0.000 0.000 0.934 4.909

TOTAL 22.268 11.399 0.251 0.139 0.061 4.029 1.227 5.162

SSA GASOLINE BALANCE million bpd

SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.230 0.066 0.127 0.037LOCAL CTL/GTL PRODUCTION (1) 0.085 0.085PLUS IMPORTS FROM OTHER SSA 0.003 0.001 0.000 0.002PLUS IMPORTS FROM OUTSIDE SSA 0.237 0.187 0.028 0.022LESS EXPORTS TO OTHER SSA (0.003) 0.000 (0.003) 0.000LESS EXPORTS TO OUTSIDE SSA (0.016) (0.002) (0.013) 0.000=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.536 0.251 0.224 0.061DEMAND (FROM S&D) 0.536 0.250 0.224 0.0621. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries

CONSUMING REGIONSSSA GASOLINE PRODUCTION & TRADE




Exhibit 3-11: 2015 Case 215: SSA Distillates Production and Trade (Current Fuel Specifications) Million barrels per day


WO

RLD

T

OT

AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

A

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA






TOTAL 32.713 9.627 0.331 0.185 0.252 9.927 2.107 10.284

SSA DISTILLATES BALANCE million bpd

SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.449 0.152 0.217 0.081LOCAL CTL/GTL PRODUCTION (1) 0.158 0.158PLUS IMPORTS FROM OTHER SSA 0.060 0.000 0.000 0.060PLUS IMPORTS FROM OUTSIDE SSA 0.329 0.179 0.037 0.112LESS EXPORTS TO OTHER SSA (0.060) 0.000 (0.060) 0.000LESS EXPORTS TO OUTSIDE SSA (0.009) 0.000 (0.009) 0.000=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.926 0.331 0.343 0.252DEMAND (FROM S&D) 0.925 0.331 0.343 0.2521. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries

CONSUMING REGIONSSSA DISTILLATES PRODUCTION & TRADE (JET, KERO, GASOIL, DIESEL)




Exhibit 3-12: 2015 Case 215: SSA Products Balance (Current Fuel Specifications) Million barrels per day

SSA TOTAL PRODUCTS BALANCE million bpd

SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.898 0.324 0.415 0.159LOCAL CTL/GTL PRODUCTION (1) 0.243 0.000 0.243 0.000PLUS LPG SUPPLIED EX NGLs 0.008 0.002 0.000PLUS IMPORTS FROM OTHER SSA 0.070 0.001 0.000 0.069PLUS IMPORTS FROM OUTSIDE SSA 0.609 0.377 0.077 0.155LESS EXPORTS TO OTHER SSA (0.070) (0.000) (0.070) 0.000LESS EXPORTS TO OUTSIDE SSA (0.060) (0.021) (0.039) (0.000)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 1.699 0.689 0.627 0.383DEMAND (FROM S&D) 1.699 0.688 0.627 0.384VOLUMES EXCLUDE INTERNAL REFINERY FUEL CONSUMPTION1. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries

SSA PRODUCT DEFICITS / SURPLUSES million bpd

SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

Imports minus (Exports)GASOLINE 0.221 0.185 0.012 0.024DISTILLATES 0.319 0.179 (0.031) 0.171RESIDUAL FUELS 0.007 (0.001) (0.012) 0.020OTHER PRODUCTS 0.001 (0.007) (0.001) 0.009TOTAL PRODUCTS 0.548 0.357 (0.033) 0.224




Exhibit 3-13: 2015 Case 215: SSA Finished Products Supply Costs and Crack Spreads (Current Fuel Specifications)

SSA FINISHED PRODUCT SUPPLY COSTS (BASIS OPEN MARKET PRICES)

Total Regional Oil Products Cost $(2007) million per year(Basis Open Market - not Retail - Prices * Demand for Each Product = Supply Cost)

SSA-TOTAL AW-Total AS-Total AE-Total

LPG G Jet Fuel Kerosene Gasoil/Diesel (excluding bunker fuels) R F Other Products (includes naphtha) M B F Total $ million / year 40,359$ 16,184$ 14,927$ 9,249$

INTERNATIONAL CRACK SPREADS / DIFFERENTIALS (BASIS OPEN MARKET PRICES)

Region US Gulf NW Europe Singapore Africa West

PADD-3 EUR-No PacHi

Crude WTI Brent Dubai CIF B. Light

Crude Price

Gasoline - CG Regular

Diesel - Crude

HS Resid - IFO380

Spreads vs. CrudeGasoline - Crude

Diesel - Crude

HS Resid - Crude

Crack Spreads3-2-1 (approximate FCC cracking)

2-1-1 (approximate HCR cracking)

4-1-1-2 (approximate hydro-skimming)




When SSA refineries move to AFRI-4 specifications in 2015:

• The majority of investment is in desulfurization of distillate and FCC gasoline

• New capacity is built only in Africa East • Overall total crude capacity used falls from 47.25

mmt/y in the current specification case to 43.83 mmt/y in the AFRI-4 case.

• Utilization falls across almost all regions

Incremental global investment outside SSA in this case, as compared to the previous 2015 case, is $1.9 billion representing the potential for imports of AFRI-4 gasoline and diesel into SSA

AFRI-4 FUEL SPECIFICATIONS IN 2015: WORLD® CASE 216 The second 2015 case, Case 216, has the same underlying assumptions as the first except that those refineries that are economically capable move to the AFRI-4 fuel standards. Exhibit 3-14 shows the growth in capacity of the SSA refineries between 2010 and 2015 based on normal demand growth and a move to the AFRI-4 standards albeit in unfavorable economic conditions. As in the first 2015 case there is some revamping in South Africa (1.927 million tonnes per year (mmt/y) rather than the previous 2.055 mmt/y), but no where else in SSA. No new capacity is built except for the new refinery mentioned before in Africa East. Distillate desulfurization expands in all three regions, as does aromatics recovery and hydrogen and sulfur plant capacities. In Africa West the expansion of distillate desulfurization occurs in all the refining sub-regions except Congo/Gabon. Aromatics recovery is focused in Ghana/Cóte d’Ivoire and the Cameroon. In Africa South expansions are found largely in South Africa but not in Angola, and in Africa East the focus is on Sudan and the new capacity. There is expansion of vacuum distillation in Africa West to accommodate normal growth, and some expansion of FCC gasoline desulfurization in South Africa. Africa East sees not only an expansion in distillation but also an expansion in coking, and the FCC. Exhibit 3-15 summarizes the expansions and also shows the estimated refinery utilization. What is shown clearly is that the small older refineries that had problems under the first 2015 case have even more problems under the second more stringent 2015 case. Utilization for Congo/Gabon, Angola and Kenya falls even further. The low utilization for the SGI region reflects the impact of the Senegalese refinery. Exhibit 3-16 shows the capital investment required for these expansions. The lower part of the exhibit puts the SSA investment in the global context. SSA investments rise from $1.9 billion, Case 215, to $3.1 billion in this case, Case 216, but global investments outside SSA also rise in other regions by 4 percent. The increase outside of SSA translates into an increase to $56.1 billion compared to $54.2 billion in the previous case, Case 215. The incremental $1.9 billion invested in the rest of the world outside SSA represents the potential that the global market sees for imports into

SSA. Exhibits 3-17 and 3-18 show SSA refinery product production and refinery yields and refinery fuel use and loss. Total product production falls in all regions except Africa South where it grows slightly. Exhibits 3-19 and 3-20 show world trade in gasoline

and diesel and how imports and exports affect the SSA refiners.13. Slightly less gasoline continues to come to Africa West from Europe; 183 Mb/d compared to 187 Mb/d. Both Africa South and Africa East receive more gasoline imports from the large export refineries in India and the Middle East.

13 Similar tables for all other products may be found in Appendix C of Volume II-B



Both Africa West and Africa South export gasoline to other SSA areas but no longer to the Americas. Africa East now exports some gasoline to Africa South. Distillates movements are still the same as in the first 2015 case. Exports from the SSA regions stay in those regions but a somewhat higher volume moves around. The model does constrain the export of distillates from SSA by not allowing the export of any high sulfur distillate. West Africa receives imports from only the United States14 (note the previous discussion on the gasoline/distillate imbalance) and both Africa South and Africa East receive imports from the Middle East and Asia. The overall total product balances and deficits and surpluses are shown in Exhibit 3-21. The final exhibit from the run, Exhibit 3-22 shows estimated SSA finished product supply costs for this case and the lower part of the exhibit shows estimated crack spreads. Costs are in millions of 2007 dollars. The product spreads versus crude oil change minimally in the major markets compared to Case 215, but change substantially in the West African market. The premium on gasoline switches from negative to positive while the premium on diesel widens even more than in the first 2015 case. The same pattern can be observed in the crack spreads.

14 We are assuming the large Middle East export refineries which are on hold currently will come on line post 2015.



Exhibit 3-14: 2015 Case 216: Incremental Capacity Requirements (AFRI-4 Fuel Specifications) Million tonnes per year



CAT REF HP TO CCR 1.379 0.000 1.379 0.000 1.379DDS CONV TO LSD 0.000DDS CONV TO ULSD 0.648 0.000 0.648 0.000 0.648LSD TO ULSD 0.000 0.000 0.000 0.000LSD TO ULS+AD 0.000 0.000 0.000 0.000MTBE TO ISO-OCTANE 0.000

CRUDE ATMOSPHERIC 0.000 0.000 0.000 0.000VACUUM DISTILLATION 0.000 0.000 0.000 0.000CAT CRACKING 0.000 0.000 0.000 0.000HYDROCRACKING 0.000 0.000 0.000 0.000DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000













Exhibit 3-15: 2015 Case 216: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications) Million tonnes per year



BASE CAPACITY 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00FIRM CONSTRUCTION 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00DEBOTTLENECKING ADDITIONS 0.00 0.00 0.00 0.00MAJOR NEW UNIT ADDITIONS 2.50 0.00 0.00 2.50 2.50TOTAL ADDITIONS OVER BASE 2.50 0.00 0.00 2.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.50TOTAL BASE + ADDITIONS 2015 75.16 34.06 26.91 14.19 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 2.50

0.00 0.00 0.00 0.00TOTAL CRUDE CAPACITY USED 2015 43.83 15.16 20.98 7.70 4.50 1.96 8.70 0.14 20.83 0.35 5.10 2.25Refinery Utilisation 58% 45% 78% 54% 62% 83% 39% 5% 86% 29% 85% 90% Source: WORLD® runs, May 17th, 2009

Exhibit 3-16: 2015 Case 216: Incremental Investment Costs (AFRI-4 Specifications) $(2007) Billions


REVAMP 0.20$ -$ 0.20$ -$ 0.20$ DEBOTTLENECKING -$ -$ -$ -$ MAJOR NEW UNITS 2.93$ 0.47$ 0.34$ 2.13$ 0.11$ 0.02$ 0.33$ 0.00$ 0.34$ 0.09$ 0.32$ 1.72$ TOTAL REFINING 3.14$ 0.47$ 0.54$ 2.13$ 0.11$ 0.02$ 0.33$ 0.00$ 0.54$ 0.09$ 0.32$ 1.72$


NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA




TOTALcheck

REFINING

SSA TOTAL



Exhibit 3-17: 2015 Case 216: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications) Million tonnes per year

REFINERY PRODUCT PRODUCTION Case: 2015: - Un-Favorable Open Market AFRI-4 million tonnes per year

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWLPGs (includes LPG & propylene) 2.32 0.63 1.08 0.62 0.22 0.02 0.38 0.00 0.00 0.00 1.07 0.00 0.00 0.00 0.40 0.22Naphthas (including White Spirits & Solvents) 1.74 1.12 0.44 0.19 0.18 0.25 0.68 0.00 0.00 0.00 0.43 0.00 0.05 0.00 0.05 0.08Gasoline 10.23 3.35 5.19 1.68 0.74 0.21 2.40 0.00 0.00 0.01 5.19 0.00 0.01 0.00 0.93 0.75of which 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00- Reformulated 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00- Conventional 10.23 3.35 5.19 1.68 0.74 0.21 2.40 0.00 0.00 0.01 5.19 0.00 0.01 0.00 0.93 0.75Aromatics 0.43 0.01 0.37 0.05 0.01 0.00 0.00 0.00 0.00 0.00 0.37 0.00 0.00 0.00 0.05 0.00Jet/Kerosene 7.13 3.31 3.57 0.26 1.25 0.38 1.68 0.00 0.00 0.01 3.56 0.00 0.08 0.00 0.14 0.04Gasoil/Diesel 11.06 2.14 6.18 2.75 0.68 0.18 1.28 0.00 0.00 0.03 6.15 0.00 0.03 0.00 1.96 0.75of which 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00- Ultra-low Sulfur (50 ppm) 8.26 1.35 5.00 1.91 0.33 0.04 0.98 0.00 0.00 0.00 5.00 0.00 0.03 0.00 1.45 0.42- Low Sulfur (500 ppm) 0.33 0.00 0.00 0.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.33- High Sulfur / Distillate Bunkers (MGO, MDO) 2.47 0.79 1.18 0.51 0.35 0.14 0.30 0.00 0.00 0.03 1.15 0.00 0.00 0.00 0.51 0.00Residual Fuels 7.45 4.18 1.60 1.67 1.29 0.81 2.08 0.00 0.00 0.08 1.52 0.00 0.16 0.00 1.27 0.25of which 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00- Low Sulfur (max 1% Sulfur) 6.65 4.18 1.07 1.40 1.29 0.81 2.08 0.00 0.00 0.00 1.07 0.00 0.00 0.00 1.27 0.13- High Sulfur / Bunkers (IFO 180/380) 0.81 0.00 0.53 0.27 0.00 0.00 0.00 0.00 0.08 0.45 0.00 0.16 0.00 0.00 0.12- High Sulfur 0.46 0.00 0.18 0.27 0.00 0.00 0.00 0.00 0.00 0.08 0.10 0.00 0.16 0.00 0.00 0.12- Bunkers (IFO 180/380) 1.10 0.75 0.35 0.00 0.00 0.00 0.75 0.00 0.00 0.00 0.35 0.00 0.00 0.00 0.00 0.00Lubes & Waxes 0.57 0.07 0.44 0.05 0.00 0.00 0.07 0.00 0.00 0.00 0.44 0.00 0.00 0.00 0.00 0.05Bitumen 0.59 0.25 0.34 0.00 0.00 0.25 0.00 0.00 0.00 0.34 0.00 0.00 0.00 0.00 0.00Petroleum Coke 0.04 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00 0.00 0.02 0.00Other 0.46 0.07 0.36 0.03 0.01 0.00 0.07 0.00 0.00 0.00 0.36 0.00 0.00 0.00 0.00 0.03

TOTAL 42.04 15.13 19.59 7.29 4.38 1.85 8.90 0.00 0.00 0.14 19.45 0.00 0.33 0.00 4.82 2.17

Refinery Out-turn as Percent on Total Feed 95.3% 99.1% 92.7% 94.7% 96.7% 94.3% 101.4% 0.0% 0.0% 95.4% 92.7% 0.0% 94.1% 0.0% 94.4% 96.6%

Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWVolume %LPGs (includes LPG & propylene) 5.5% 4.1% 5.5% 8.5% 5.1% 1.2% 4.3% 1.5% 5.5% 1.1% 8.2% 10.2%Naphthas (including White Spirits & Solvents) 4.1% 7.4% 2.2% 2.5% 4.0% 13.7% 7.7% 3.3% 2.2% 15.9% 1.1% 3.7%Gasoline 24.3% 22.2% 26.5% 23.1% 17.0% 11.1% 27.0% 6.6% 26.7% 2.0% 19.3% 34.3%Aromatics 1.0% 0.1% 1.9% 0.6% 0.2% 0.2% 0.0% 0.0% 1.9% 0.2% 1.0% 0.0%Jet/Kerosene 17.0% 21.9% 18.2% 3.5% 28.6% 20.3% 18.9% 8.5% 18.3% 23.2% 2.8% 1.9%Gasoil/Diesel 26.3% 14.1% 31.5% 37.6% 15.5% 9.7% 14.4% 18.5% 31.6% 9.6% 40.8% 34.5%Residual Fuels 17.7% 27.6% 8.2% 22.9% 29.5% 43.7% 23.4% 61.6% 7.8% 47.3% 26.3% 11.5%Lubes & Waxes 1.4% 0.5% 2.3% 0.7% 0.0% 0.0% 0.8% 0.0% 2.3% 0.0% 0.0% 2.5%Bitumen 1.4% 1.7% 1.7% 0.0% 0.0% 0.0% 2.8% 0.0% 1.8% 0.0% 0.0% 0.0%Petroleum Coke 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.4% 0.1%Other 1.1% 0.5% 1.8% 0.4% 0.1% 0.0% 0.8% 0.0% 1.9% 0.8% 0.0% 1.2%




Exhibit 3-18: 2015 Case 216: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications) Million tonnes per year

REFINERY FUEL & LOSS Case: 2015: - Un-Favorable Open Market AFRI-4 million tonnes per yearG H I J W K D E O P Q Y

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWNatural Gas (Purchased) 0.033 0.033 0.000 0.000 0.033 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Still Gas (FOE) 0.857 0.157 0.497 0.203 0.067 0.016 0.075 0.000 0.000 0.001 0.496 0.000 0.000 0.000 0.157 0.046Hydrogen (FOE) 0.002 0.002 0.000 0.000 0.000 0.002 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000Hydrogen Sulfide (FOE) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000C3s C4s 0.135 0.045 0.075 0.015 0.012 0.004 0.029 0.000 0.000 0.000 0.075 0.000 0.001 0.000 0.015 0.000Residual Fuel 2.648 0.919 1.374 0.356 0.200 0.077 0.643 0.000 0.000 0.005 1.369 0.000 0.017 0.000 0.205 0.135Other Streams 0.158 0.053 0.087 0.018 0.014 0.005 0.034 0.000 0.000 0.000 0.087 0.000 0.001 0.000 0.017 0.000FCC Coke 0.366 0.050 0.182 0.135 0.011 0.000 0.039 0.000 0.000 0.000 0.182 0.000 0.000 0.000 0.066 0.069Fuel Losses 0.422 0.300 0.087 0.035 0.030 0.005 0.265 0.001 0.087 0.003 0.030 0.003Evap/Other Losses 0.219 0.076 0.105 0.039 0.023 0.010 0.044 0.000 0.000 0.001 0.104 0.000 0.002 0.000 0.026 0.011Other losses 0.641 0.375 0.192 0.074 0.053 0.015 0.308 0.000 0.000 0.001 0.191 0.000 0.004 0.000 0.056 0.014Total 4.837 1.632 2.405 0.800 0.389 0.117 1.127 0.000 0.000 0.006 2.399 0.000 0.022 0.000 0.515 0.264Check 4.837 1.632 2.405 0.800 0.389 0.117 1.127 0.000 0.000 0.006 2.399 0.000 0.022 0.000 0.515 0.264




Exhibit 3-19: 2015 Case 216: SSA Gasoline production and Trade (AFRI-4 Fuel Specifications) Million barrels per day


WO

RLD

T

OT

AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

A

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA






TOTAL 22.269 11.399 0.251 0.139 0.062 4.029 1.227 5.162


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.205 0.067 0.104 0.034LOCAL CTL/GTL PRODUCTION (1) 0.085 0.085PLUS IMPORTS FROM OTHER SSA 0.004 0.001 0.001 0.002PLUS IMPORTS FROM OUTSIDE SSA 0.254 0.183 0.037 0.034LESS EXPORTS TO OTHER SSA (0.004) (0.000) (0.003) (0.001)LESS EXPORTS TO OUTSIDE SSA (0.007) (0.000) 0.000 (0.006)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.537 0.251 0.224 0.062DEMAND (FROM S&D) 0.536 0.250 0.224 0.0621. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries





Exhibit 3-20: 2015 Case 216: SSA Distillates Production and Trade (AFRI-4 Fuel Specifications) Million barrels per day


WO

RLD

T

OT

AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

A

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA






TOTAL 32.713 9.627 0.331 0.185 0.252 9.927 2.107 10.284


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.364 0.109 0.195 0.060LOCAL CTL/GTL PRODUCTION (1) 0.158 0.158PLUS IMPORTS FROM OTHER SSA 0.046 0.000 0.001 0.045PLUS IMPORTS FROM OUTSIDE SSA 0.425 0.225 0.037 0.164LESS EXPORTS TO OTHER SSA (0.046) (0.001) (0.045) 0.000LESS EXPORTS TO OUTSIDE SSA (0.021) (0.002) (0.002) (0.017)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.926 0.331 0.343 0.252DEMAND (FROM S&D) 0.925 0.331 0.343 0.2521. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries





Exhibit 3-21: 2015 Case 216: SSA Products Balance (AFRI-4 Fuel Specifications) Million barrels per day


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.841 0.303 0.392 0.146LOCAL CTL/GTL PRODUCTION (1) 0.243 0.000 0.243 0.000PLUS LPG SUPPLIED EX NGLs 0.008 0.002 0.000PLUS IMPORTS FROM OTHER SSA 0.057 0.001 0.002 0.054PLUS IMPORTS FROM OUTSIDE SSA 0.701 0.413 0.077 0.212LESS EXPORTS TO OTHER SSA (0.057) (0.001) (0.055) (0.001)LESS EXPORTS TO OUTSIDE SSA (0.093) (0.033) (0.034) (0.026)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 1.701 0.689 0.627 0.385DEMAND (FROM S&D) 1.699 0.688 0.627 0.384VOLUMES EXCLUDE INTERNAL REFINERY FUEL CONSUMPTION1. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

Imports minus (Exports)GASOLINE 0.247 0.184 0.035 0.028DISTILLATES 0.404 0.222 (0.010) 0.192RESIDUAL FUELS (0.014) (0.008) (0.019) 0.013OTHER PRODUCTS (0.029) (0.019) (0.016) 0.006TOTAL PRODUCTS 0.608 0.379 (0.009) 0.239




Exhibit 3-22: 2015 Case 216: SSA Finished Products Supply Costs and Crack Spreads (AFRI-4 Fuel Specifications)







PADD-3 EUR-No PacHi


Crude Price


Diesel - Crude

HS Resid - IFO380


Diesel - Crude

HS Resid - Crude







In 2015 to move from current fuel specifications to AFRI-4 specifications

• Small refineries will be under extreme pressure, and

• It will cost an incremental $1.25 billion.

WORLD® MODEL RESULTS: BASE CASE AND 2015 CASES COMPARED

Exhibits 3-23 through 3-26 compare the two 2015 cases and also allow a comparison with the Base Case. Exhibit 3-23 shows total product demand and net imports. Product demand shows normal growth between the Base Case and the 2015 cases, and is the same in both the 2015 cases. Net total product imports show a difference of 6,000 b/d for SSA as a whole between the two 2015 cases. The more stringent AFR-4 Case, combined with unfavorable economic conditions, increases net imports in both Africa West and Africa East. While Africa South still exports under the 2015 AFRI-4 case imports and exports approach parity. This growth in imports is also reflected in Exhibit 3-24 which shows the decline in refinery crude oil runs.

Exhibit 3-25 shows the incremental refinery distillation expansion and the total refinery investment level. The bulk of the investment in the AFRI-4 case will be in Africa East where there will be new refinery: as mentioned before a new refinery was assumed because of the new Uganda crude oil. The overall incremental cost in 2015 of moving from current fuel specifications to AFRI-4 will be $1.25 billion. Exhibit 3-26 shows the annual supply costs under both 2015 cases: the annual total product supply cost and the annual cost for gasoline and diesel alone.



Exhibit 3-23: Base Case and 2015 Cases Summary Report: Total Product Demand and Net Imports

Total Product Demand, Million b/d (excludes refinery fuel & loss)

Total Net Product Imports Million b/d

Case # Year Description SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East 210 2010 Base 1.55 0.61 0.60 0.34 0.35 0.24 (0.08) 0.20

215 2015 Open Market Current AFRI Unfavorable

1.70

0.69

0.63

0.38

0.55

0.36

(0.03)

0.22

216 2015 Open Market AFRI-4

Unfavorable

1.70

0.69

0.63

0.38

0.61

0.38

(0.01)

0.24

Source: WORLD® runs, May 21, 2009

Exhibit 3-24: Base Case and 2015 Cases Summary Report: Total Gasoline and Diesel Demand and Refinery Crude Oil Runs

Total AFRI Gasoline and Diesel Demand Million b/d

Refinery Crude Oil Runs Million b/d

Case # Year Description SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East 210 2010 Base 1.07 0.43 0.43 0.21 0.99 0.37 0.47 0.14


1.15

0.48

0.44

0.24

0.94

0.34

0.44

017


Unfavorable

1.15

0.48

0.44

0.24

0.88

0.30

0.42

0.15




Exhibit 3-25: Base Case and 2015 Cases Summary Report: Incremental Refinery Distillation Expansions and Total Investments

Refinery Distillation Expansions vs. Base Million b/d

Total Refinery Investments $(2007) billions

Case # Year Description SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East 210 2010 Base 0.000 0.000 0.000 0.000 $0.06 $0.01 $0.05 -


0.050

0.000

0.000

0.050

$1.89

$0.02

$0.28

$1.60


Unfavorable

0.0500

0.000

0.000

0.050

$3.14

$0.47

$0.54

$2.13


Exhibit 3-26: Base Case and 2015 Cases Summary Report: Total Product Supply Cost and AFRI Gasoline and Diesel Supply Cost

Total Product Supply Cost $(2007) million/year

AFRI Gasoline and Diesel Cost $(2007) million/year

Case # Year Description SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East 210 2010 Base $30,920 $12,207 $11,928 $6,785 $21,463 $8,693 $8,394 $4,376


$40,359

$16,184

$14,927

$9,249

$27,196

$11,153

$10,293

$5,750


Unfavorable

$42,459

$14,111

$15,496

$9,852

$29,335

$12,134

$10,841

$6,361


Volume II-A: Final Refinery Study Report 2020 Constrained Cases


4: THE 2020 CONSTRAINED CASES

OVERVIEW Although the thrust of this report is an evaluation of the costs and benefits of improving the specifications of SSA transportation fuels, and also the viability of the industry in open market competition in the global marketplace certain other cases were evaluated. Refineries in emerging markets play a number of roles not all of them purely economic. From the point of view of the SSA governments, and most SSA refineries are either totally or partially government owned, refineries can represent the following:

• Centers of technical competence • Centers of tax revenues • Employment centers (and by employment we also include the section of the population

supported by the refinery staff) Nevertheless, the refining industry has the following characteristics that make it hard for certain refineries to adequately compete in an open global market.

• Capital intensity • Economies of scale (both in the size of the refinery and the size of the market)

Looking at SSA refineries and SSA markets one must conclude that with the exception of Nigeria and South Africa the individual national markets are small and most of the refineries are small in global terms. This is not to say that small refineries cannot be profitable, but to be so they must have a captive or niche market and produce high-value added products. SSA refineries are also facing global competition from the new large Indian and Middle Eastern export refineries.15 The Indian refineries have received substantial tax benefits from both the Indian federal and state governments, while the Middle Eastern refineries will pay feedstock prices set by the government not by the open market. Nevertheless, for a number of different reasons the SSA governments may wish to know what the costs are of maintaining all of the current SSA refineries at their current levels of operation. Consequently, ICF/EnSys has generated two 2020 “constrained “ cases, that is all currently operating SSA refineries are forced to continue in operation: one case in which there is no change to the current transportation fuels specifications in 2020, and the second case in which AFRI-4 specifications are reached by all SSA refineries in 2020. These two cases will give the Bank and the ARA Steering Committee several pieces of information:

• If all SSA refineries are maintained what is the incremental cost to move all these refineries to AFRI-4 standards, and

15 Currently, because of the global recession the Middle Eastern refineries have been delayed or postponed. However, assuming the recovery of the global economy we assume that at least the two Saudi ARAMCO projects (Jubail and Yanbu) will come on line post 2015.



A MAJOR CHANGE IN ONE OF THE UNDERLYING ASSUMPTIONS Due to the increases in the SSA capital costs accepted by the Steering Committee capital costs were raised in all the future cases As an example:

• Previous investment in the 2020 constrained AFRI-4 case was $6.66 billion

• Current investment in this case is now $8.67 billion

New Plants Africa West – the model placed an upper limit on new capacity to 200 Mb/d or 10mmt/y to be conservative Africa East – this is a new refinery entered into the model to process Ugandan crude oil

• If all SSA refineries are maintained what is the incremental cost compared to the open market case to move all these refineries to the AFRI-4 standards.

These 2020 cases are run as full “investment open” cases with respect to investments, i.e. total available global capacity equals the January 2008 base capacity plus projects under construction. The WORLD® model is allowed to invest on top of this with no restrictions. SSA refineries

continue to run at levels close to historical actual runs with their crude oil slates close to historical crude slates. In the one case the SSA fuel standards do not advance, but in the other fuel standards reach AFRI-4.

CONSTRAINED CASES RESULTS

CONSTRAINED CASE: CURRENT FUEL

SPECIFICATIONS IN 2020: WORLD® CASE 224 Exhibit 4-1 shows the incremental refinery capacity that would be required by SSA refineries in 2020 even if the current fuel

specifications are kept. The need for increased capacity is driven by growing population levels, an increase in GDP, and an increase in the demand for liquid fuels. Population, GDP, and demand estimates for each country out through 2020 can be found in Appendix A in Volume II-B. Refinery capacity growth comes from revamping, debottlenecking, and from new units. Revamping is found only in the Africa South region (192 mmt/y). Debottlenecking occurs in all three regions, with the majority (1.249 mmt/y) occurring in Africa South, followed by Africa West (0.411 mmt/y), and by Africa East (0.302 mmt/y). The majority of the growth occurs in new processing units, and new units are seen in every existing refinery subgroup in SSA. In addition, a new refinery (or major expansions in existing refineries) is built in Africa West and Africa East with the largest, 10.0 mmb/y (200 Mb/d) of capacity being built in Africa West, and one of smaller capacity, 2.5 mmt/y (50 Mb/d), being built in Africa East. Exhibit 4-2 shows the total refinery capacity for the three SSA regions and the refinery subgroups. This exhibit identifies the base and the incremental capacity. Throughput is also shown giving the utilization rate for each subgroup in SSA. Utilization is generally high except for Nigeria which is assumed to continue to have operational problems in the oil industry, and in Africa East.16 The utilization for the overall SGI refinery group is pulled down by the problems experienced by Senegal. Utilization numbers for the two new refineries are high, assuming modern, efficient plants.

16 The small inland refinery in Zambia is assumed to continue to run at low utilization in all cases to provide fuel for the mining industry.



Exhibit 4-3 shows the investment costs for the new incremental capacity required to meet demand in billions of 2007 dollars. Investment costs range from $0.6 billion in Africa South to $1.61 in Africa East to $3.19 billion in Africa West. Total investment costs in SSA in this case are $5.40 billion. This can be compared to the next constrained case in which all SSA refineries are compelled to move to AFRI-4 standards by 2020. In that case the total investment is $8.67 billion, a difference of just over $3.0 billion. Exhibit 4-4 shows the refinery product production and refinery yield under this scenario while Exhibit 4-5 shows the refinery fuel and loss. Note that it is assumed that the new Africa West refinery will have access to natural gas for fuel. Exhibits 4-6 and 4-7 show the trade in gasoline and distillates among the SSA regions and between SSA and the rest of the world. Note that the export refineries in the Middle East/India export gasoline and particularly distillates to all three SSA regions, and in particular to Africa East. Europe exports gasoline to all three SSA regions and in turn Africa West exports gasoline to the Americas. There is also movement of gasoline between Africa South and Africa East. Distillates are somewhat similar in movement with European and American distillate moving into Africa West. The balance for all products in SSA is shown in Exhibit 4-8. The finished product supply costs for SSA are shown in Exhibit 4-9 as are the crack spreads. Once again the results show the strength of the diesel market throughout the globe.



Exhibit 4-1: 2020 Constrained Case 224: Incremental Capacity Requirements (Current Fuel Specifications) Million tonnes per year




CRUDE ATMOSPHERIC 1.506 0.352 0.925 0.229 0.275 0.077 0.925 0.229VACUUM DISTILLATION 0.134 0.059 0.002 0.073 0.059 0.002 0.073CAT CRACKING 0.199 0.000 0.199 0.000 0.199HYDROCRACKING 0.023 0.000 0.023 0.000 0.023DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000













Exhibit 4-2: 2020 Constrained Case 224: SSA Refinery Capacity and Throughput (Current Fuel Specifications) Million tonnes per year



BASE CAPACITY 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00FIRM CONSTRUCTION 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00DEBOTTLENECKING ADDITIONS 1.51 0.35 0.93 0.23 0.27 0.08 0.93 0.23MAJOR NEW UNIT ADDITIONS 14.58 10.00 1.90 2.68 10.00 1.90 0.18 2.50TOTAL ADDITIONS OVER BASE 16.08 10.35 2.83 2.91 0.27 0.08 0.00 0.00 10.00 0.00 2.83 0.00 0.00 0.00 0.41 2.50TOTAL BASE + ADDITIONS 2020 88.74 44.41 29.74 14.59 7.48 2.43 22.25 2.25 10.00 2.65 27.09 0.00 1.19 4.50 6.41 2.50

0.00 0.00 0.00 0.00TOTAL CRUDE CAPACITY USED 2020 67.42 31.05 26.43 9.94 6.35 2.21 11.83 1.65 9.00 2.07 24.37 0.37 1.87 5.45 2.25Refinery Utilisation 76% 70% 89% 68% 85% 91% 53% 73% 90% 78% 90% 31% 42% 85% 90% Source: WORLD® runs, May 17th, 2009

Exhibit 4-3: 2020 Constrained Case 224: Incremental Investment Costs (Current Fuel Specifications) $(2007) Billions


REVAMP 0.23$ -$ 0.23$ -$ 0.23$ DEBOTTLENECKING 0.05$ 0.01$ 0.03$ 0.01$ 0.01$ 0.00$ 0.00$ 0.03$ 0.01$ MAJOR NEW UNITS 5.13$ 3.18$ 0.34$ 1.61$ 0.03$ 0.00$ 0.08$ 0.03$ 3.03$ 0.08$ 0.26$ 0.04$ 0.03$ 0.10$ 1.44$ TOTAL REFINING 5.40$ 3.19$ 0.60$ 1.61$ 0.04$ 0.00$ 0.08$ 0.03$ 3.03$ 0.08$ 0.52$ 0.04$ 0.03$ 0.10$ 1.44$


NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA




TOTALcheck

REFINING

SSA TOTAL




Exhibit 4-4: 2020 Constrained Case 224: SSA Refinery Product Production and Yields (Current Fuel Specifications) Million tonnes per year

REFINERY PRODUCT PRODUCTION Case: 2020: - BASE Crude Forced Current Specs million tonnes per year


TOTAL 64.54 30.15 24.90 9.46 6.16 2.10 10.89 1.56 9.43 1.92 22.98 0.00 0.35 1.75 5.17 2.22


Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWVolume %LPGs (includes LPG & propylene) 3.8% 2.3% 4.8% 6.3% 2.8% 0.5% 2.2% 1.5% 2.4% 0.5% 5.1% 1.6% 1.9% 6.7% 9.6%Naphthas (including White Spirits & Solvents) 4.2% 7.0% 1.5% 2.2% 6.9% 11.7% 8.3% 4.2% 4.9% 8.8% 0.9% 11.2% 7.8% 0.0% 1.4%Gasoline 22.3% 17.5% 28.2% 22.0% 17.8% 13.9% 24.4% 10.7% 11.2% 12.6% 29.5% 6.9% 13.0% 19.9% 36.4%Aromatics 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0%Jet/Kerosene 15.7% 17.9% 17.0% 5.5% 17.4% 17.1% 10.1% 15.6% 27.7% 0.0% 18.4% 11.0% 20.3% 2.5% 0.0%Gasoil/Diesel 36.1% 32.4% 37.0% 45.5% 35.0% 16.7% 42.4% 21.1% 24.6% 58.8% 35.2% 21.6% 19.2% 58.2% 40.2%Residual Fuels 15.2% 22.2% 5.9% 17.2% 19.7% 40.0% 11.1% 45.7% 28.9% 19.3% 4.8% 47.1% 36.5% 11.2% 11.3%Lubes & Waxes 0.8% 0.2% 1.8% 0.0% 0.0% 0.0% 0.7% 0.0% 0.0% 0.0% 1.9% 0.0% 0.0% 0.0% 0.0%Bitumen 0.5% 0.1% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 1.3% 0.0% 0.0% 0.0% 0.0%Petroleum Coke 0.1% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.4% 0.2%Other 1.3% 0.4% 2.5% 1.0% 0.3% 0.0% 0.8% 1.2% 0.0% 0.0% 2.7% 0.7% 1.3% 0.9% 1.1%




Exhibit 4-5: 2020 Constrained Case 224: SSA Refinery Fuel and Losses (Current Fuel Specifications) Million tonnes per year

REFINERY FUEL & LOSS Case: 2020: - BASE Crude Forced Current Specs million tonnes per yearG H I J W K D E O P Q Y

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWNatural Gas (Purchased) 0.602 0.602 0.000 0.000 0.040 0.000 0.000 0.000 0.563 0.000 0.000 0.000 0.000 0.000 0.000 0.000Still Gas (FOE) 0.696 0.253 0.322 0.121 0.067 0.017 0.059 0.000 0.111 0.022 0.300 0.000 0.000 0.000 0.077 0.045Hydrogen (FOE) 0.030 0.026 0.001 0.003 0.000 0.004 0.022 0.000 0.000 0.001 0.000 0.000 0.000 0.002 0.002 0.000Hydrogen Sulfide (FOE) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000C3s C4s 0.162 0.064 0.080 0.018 0.015 0.004 0.042 0.004 0.000 0.005 0.075 0.000 0.001 0.004 0.013 0.000Residual Fuel 3.496 1.389 1.668 0.440 0.256 0.078 0.967 0.089 0.000 0.098 1.571 0.000 0.017 0.095 0.240 0.088Other Streams 0.188 0.075 0.093 0.021 0.017 0.005 0.049 0.004 0.000 0.006 0.088 0.000 0.001 0.005 0.015 0.000FCC Coke 0.415 0.072 0.195 0.149 0.019 0.000 0.052 0.000 0.000 0.000 0.195 0.000 0.000 0.000 0.083 0.066Fuel Losses 0.598 0.452 0.098 0.048 0.038 0.006 0.385 0.014 0.011 0.013 0.086 0.003 0.016 0.028 0.003Evap/Other Losses 0.337 0.155 0.132 0.050 0.032 0.011 0.059 0.008 0.045 0.010 0.122 0.000 0.002 0.009 0.027 0.011Other losses 0.935 0.607 0.230 0.098 0.069 0.017 0.444 0.022 0.056 0.023 0.207 0.000 0.004 0.025 0.055 0.014Total 6.523 3.086 2.589 0.848 0.483 0.123 1.633 0.118 0.729 0.154 2.436 0.000 0.023 0.130 0.483 0.212Check 6.523 3.086 2.589 0.848 0.483 0.123 1.633 0.118 0.729 0.154 2.436 0.000 0.023 0.130 0.483 0.212




Exhibit 4-6: 2020 Constrained Case 224: SSA Gasoline Production and Trade (Current Fuel Specifications) Million barrels per day


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EU

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TOTAL 23.571 11.381 0.356 0.223 0.088 4.046 1.351 6.126


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A

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Exhibit 4-7: 2020 Constrained Case 224: SSA Distillates Trade (Current Fuel Specifications) Million barrels per day


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EU

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TOTAL 35.408 10.022 0.493 0.298 0.373 10.447 2.300 11.475


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Exhibit 4-8: 202 Constrained Case 224: SSA Products Balance (Current Fuel Specifications) Million barrels per day


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SSA PRODUCT DEFICITS / SURPLUSES million bpdS

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Imports minus (Exports)GASOLINE 0.380 0.250 0.083 0.046DISTILLATES 0.495 0.190 0.029 0.276RESIDUAL FUELS (0.012) (0.034) (0.013) 0.034OTHER PRODUCTS (0.017) (0.027) (0.003) 0.013TOTAL PRODUCTS 0.845 0.379 0.096 0.370




Exhibit 4-9: 2020 Constrained Case 224: SSA Finished Products Supply Costs and Crack Spreads (Current Fuel Specifications)







PADD-3 EUR-No PacHi


Crude Price


Diesel - Crude

HS Resid - IFO380


Diesel - Crude

HS Resid - Crude



4-1-1-2 (approximate hydro-skimming) Source: WORLD® runs, May 17th, 2009


ICF International 64 September 2009

Incremental growth in desulfurization to move to AFRI-4, mmt/y Naphtha: AW-0.53, AS-0, AE- (0.005) FCC Gasoline: AW-0.177, AS-0.829, AE-0.473 Distillate: AW-11.20, AS-1.97, AE-1.77

CONSTRAINED CASE: AFRI-4 SPECIFICATIONS IN 2020: WORLD® CASE 220 The second constrained case again maintains all the current SSA refineries and the same demand level. However, in this case all the refineries are forced to move to the AFRI-4 transportation fuel specifications. Exhibit 4-10 shows the incremental capacity required both to meet the growing demand and to meet the AFRI-4 standards. Exhibit 4-11 shows total capacity in the region and refinery subgroups and the utilization. There is a slight falling off in capacity in this case compared to the previous case, and a slight increase in utilization in Africa West. As Exhibit 4-10 shows, the level and distribution of revamping and debottlenecking remains essentially the same as in the previous constrained case. The differences are in the new capacity. Distillation and coking capacity decrease as does FCC capacity. There is a substantial increase in catalytic reforming, particularly in Africa West. Hydrocracking levels remain constant between the two cases. The major area of growth is in desulfurization, naphtha, FCC gasoline and distillate. Also growing strongly are the ancillary plants such as the hydrogen plant and the sulfur plants.

This particular pattern will also be seen in the open market cases. When moving to AFRI-4 specifications for gasoline and diesel, the refinery processing impacts will depend, in part, on the SSA region. In Africa West the main impact will be on the AFRI-4 diesel. The sulfur target for diesel is 50 ppm compared to 150 ppm for gasoline. As regards gasoline most of the crude oils used in the region are sweet and there is limited FCC capacity as a source of sulfur in gasoline. In Africa South and East the impact will be seen on both fuels. Both regions run mainly sour crude oils and there is significant FCC capacity the gasoline output of which will have to be desulfurized. As in the previous constrained case there is new capacity built in both Africa West and Africa East, but not in Africa South. Exhibit 4-12 shows the investment costs for the incremental capacity required to meet growing demand and to meet the AFRI-4 requirements. The bulk of the investments are in Africa West, followed by Africa East and then Africa South. This is to be expected as South Africa already has good quality transportation fuels based on the EU standards. In Africa West, other than the new refinery, the bulk of the investments are in Nigeria, and Ghana/Côte d’Ivoire. The bottom of Exhibit 4-12 places SSA investment in the global context and shows the changes in the other regions of the world. The incremental investment costs outside of SSA driven by the AFRI-4 specifications and by the potential to export AFRI-4 gasoline and diesel to SSA, amount to $6.7 billion, with $2.8 billion in the Middle East/Asia region. The size of the investment indicates the level of competitive pressures likely to be felt by the SSA refiners. Exhibits 4-13 and 4-14 show the SSA refinery product production and yields, and the refinery fuel use and loss. Exhibits 4-15 and 4-16 show the imports and exports of gasolines and distillates between and among the SSA regions and the rest of the world, and Exhibit 4-17 shows the product balances for the SSA regions.


ICF International 65 September 2009

The impact of AFRI-4 on gasoline imports depends on the region. In the case of Africa West imports of gasoline decline, in Africa South they remain relative flat and in Africa East they increase slightly. What do change are the exports. Exports of gasoline from Africa West and Africa South end. In the case of distillates, imports into Africa West decrease, but imports into Africa South and Africa East increase by 19 Mb/d and 46 Mb/d respectively. Exhibit 4-18 shows the SSA finished product supply costs and the crack spreads. The detailed runs for both cases can be found in Appendix C in Volume II-B. Included in the appendices are feedstock inputs by type, product production and prices.



Exhibit 4-10: 2020 Constrained Case 220: SSA Incremental Capacity Requirements (AFRI-4 Fuel Specifications) Million tonnes per year




CRUDE ATMOSPHERIC 1.518 0.364 0.925 0.229 0.275 0.090 0.925 0.229VACUUM DISTILLATION 0.061 0.059 0.002 0.000 0.059 0.002CAT CRACKING 0.199 0.001 0.199 0.000 0.001 0.000 0.199HYDROCRACKING 0.023 0.000 0.023 0.000 0.023DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000













Exhibit 4-11: 2020 Constrained Case 220: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications)

Million tonnes per year REFINERY CAPACITY & THROUGHPUT SUMMARY million tonnes per year


BASE CAPACITY 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00FIRM CONSTRUCTION 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00DEBOTTLENECKING ADDITIONS 1.52 0.36 0.93 0.23 0.27 0.09 0.93 0.23MAJOR NEW UNIT ADDITIONS 12.85 10.00 0.35 2.50 10.00 0.35 2.50TOTAL ADDITIONS OVER BASE 14.37 10.36 1.28 2.73 0.27 0.09 0.00 0.00 10.00 0.00 1.28 0.00 0.00 0.00 0.23 2.50TOTAL BASE + ADDITIONS 2020 87.03 44.42 28.19 14.42 7.48 2.45 22.25 2.25 10.00 2.65 25.54 0.00 1.19 4.50 6.23 2.50

0.00 0.00 0.00 0.00TOTAL CRUDE CAPACITY USED 2020 66.17 31.36 25.04 9.77 6.35 2.22 12.29 1.50 9.00 2.07 22.97 0.35 1.87 5.29 2.25Refinery Utilisation 76% 71% 89% 68% 85% 91% 55% 67% 90% 78% 90% 29% 42% 85% 90% Source: WORLD® runs, May 17th, 2009



Exhibit 4-12: 2020 Constrained Case 220: SSA Incremental Investment Costs (AFRI-4 Fuel Specifications) $(2007) Billions


REVAMP 0.26$ -$ 0.26$ -$ 0.26$ DEBOTTLENECKING 0.05$ 0.01$ 0.03$ 0.00$ 0.01$ 0.00$ 0.00$ 0.03$ 0.00$ MAJOR NEW UNITS 8.37$ 5.30$ 0.71$ 2.35$ 0.46$ 0.07$ 1.19$ 0.12$ 3.46$ 0.09$ 0.62$ 0.09$ 0.10$ 0.33$ 1.83$ TOTAL REFINING 8.67$ 5.31$ 1.00$ 2.36$ 0.47$ 0.07$ 1.19$ 0.12$ 3.46$ 0.09$ 0.91$ 0.09$ 0.10$ 0.33$ 1.83$


NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA



REFINING

SSA TOTAL


TOTALcheck


Exhibit 4-13: 2020 Constrained Case 220: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications) Million tonnes per year



REFINERY PRODUCT PRODUCTION Case: 2020: - BASE Crude Forced AFRI-4 million tonnes per year


TOTAL 64.03 31.44 23.36 9.21 6.11 2.10 12.35 1.45 9.43 1.94 21.42 0.00 0.33 1.75 5.02 2.14


Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWVolume %LPGs (includes LPG & propylene) 3.7% 1.7% 4.5% 8.2% 2.8% 0.6% 1.2% 0.5% 2.1% 0.5% 4.9% 1.1% 2.3% 9.7% 10.4%Naphthas (including White Spirits & Solvents) 4.2% 5.9% 1.9% 3.9% 6.7% 12.2% 7.5% 6.8% 1.8% 7.8% 1.4% 15.9% 10.5% 1.1% 3.3%Gasoline 23.5% 21.8% 27.3% 19.5% 18.1% 13.1% 30.5% 10.7% 16.4% 12.0% 28.7% 2.0% 9.5% 17.3% 35.2%Aromatics 0.6% 0.2% 0.9% 0.9% 0.2% 0.2% 0.0% 0.0% 0.5% 0.2% 0.9% 0.2% 0.8% 1.4% 0.0%Jet/Kerosene 14.3% 15.4% 15.8% 6.5% 13.8% 18.9% 18.0% 17.4% 12.0% 19.3% 15.5% 22.6% 23.9% 0.9% 2.7%Gasoil/Diesel 34.3% 33.8% 34.9% 34.1% 37.9% 15.1% 27.1% 15.2% 47.1% 21.0% 36.2% 10.2% 13.8% 45.1% 28.2%Residual Fuels 16.7% 20.4% 8.7% 24.5% 20.1% 40.0% 14.1% 48.0% 20.1% 39.2% 5.9% 47.4% 37.8% 23.7% 11.7%Lubes & Waxes 1.0% 0.2% 1.9% 1.7% 0.0% 0.0% 0.6% 0.0% 0.0% 0.0% 2.1% 0.0% 0.0% 0.0% 7.2%Bitumen 0.5% 0.0% 1.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.4% 0.0% 0.0% 0.0% 0.0%Petroleum Coke 0.1% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.4% 0.1%Other 1.3% 0.5% 2.6% 0.8% 0.2% 0.0% 0.9% 1.3% 0.0% 0.0% 2.9% 0.8% 1.4% 0.4% 1.2%




Exhibit 4-14: 2020 Constrained Case 220: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications) Million tonnes per year

REFINERY FUEL & LOSS Case: 2020: - BASE Crude Forced AFRI-4 million tonnes per yearG H I J W K D E O P Q Y

SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWNatural Gas (Purchased) 0.675 0.675 0.000 0.000 0.048 0.000 0.000 0.000 0.627 0.000 0.000 0.000 0.000 0.000 0.000 0.000Still Gas (FOE) 0.922 0.366 0.355 0.202 0.105 0.023 0.071 0.000 0.167 0.028 0.327 0.000 0.000 0.001 0.156 0.045Hydrogen (FOE) 0.009 0.009 0.000 0.001 0.000 0.002 0.007 0.000 0.000 0.000 0.000 0.000 0.000 0.001 0.000 0.000Hydrogen Sulfide (FOE) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000C3s C4s 0.182 0.074 0.088 0.021 0.018 0.005 0.048 0.004 0.000 0.005 0.084 0.000 0.001 0.004 0.016 0.000Residual Fuel 3.936 1.572 1.825 0.540 0.291 0.090 1.102 0.090 0.000 0.081 1.744 0.000 0.017 0.104 0.243 0.177Other Streams 0.211 0.085 0.102 0.024 0.021 0.006 0.055 0.004 0.000 0.005 0.097 0.000 0.001 0.005 0.019 0.000FCC Coke 0.355 0.058 0.168 0.129 0.017 0.000 0.041 0.000 0.000 0.000 0.168 0.000 0.000 0.000 0.058 0.072Fuel Losses 0.667 0.508 0.105 0.055 0.044 0.006 0.433 0.014 0.011 0.012 0.094 0.003 0.017 0.033 0.003Evap/Other Losses 0.331 0.157 0.125 0.049 0.032 0.011 0.061 0.008 0.045 0.010 0.115 0.000 0.002 0.009 0.026 0.011Other losses 0.998 0.664 0.230 0.103 0.076 0.017 0.494 0.022 0.056 0.022 0.208 0.000 0.004 0.026 0.059 0.014Total 7.287 3.501 2.767 1.019 0.574 0.141 1.818 0.119 0.849 0.140 2.627 0.000 0.022 0.139 0.551 0.307Check 7.287 3.501 2.767 1.019 0.574 0.141 1.818 0.119 0.849 0.140 2.627 0.000 0.022 0.139 0.551 0.307




Exhibit 4-15: 2020 Constrained Case 220: SSA Gasoline Trade (AFRI-4 Fuel Specifications) Million barrels per day


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TOTAL 23.571 11.381 0.356 0.223 0.088 4.046 1.351 6.126


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LOCAL REFINERY PRODUCTION 0.301 0.137 0.128 0.036LOCAL CTL/GTL PRODUCTION (1) 0.087 0.087PLUS IMPORTS FROM OTHER SSA 0.001 0.000 0.001 0.000PLUS IMPORTS FROM OUTSIDE SSA 0.374 0.219 0.095 0.060LESS EXPORTS TO OTHER SSA (0.001) 0.000 0.000 (0.001)LESS EXPORTS TO OUTSIDE SSA (0.007) 0.000 0.000 (0.007)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.754 0.356 0.310 0.088DEMAND (FROM S&D) 0.753 0.357 0.309 0.0871. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries




Source: WORLD® runs, May 17th, 2009 Exhibit 4-16: 2020 Constrained Case 220: SSA Distillates Trade (AFRI-4 Fuel Specifications)

Million barrels per day


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TOTAL 35.408 10.022 0.493 0.298 0.373 10.447 2.300 11.475


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LOCAL REFINERY PRODUCTION 0.622 0.310 0.237 0.075LOCAL CTL/GTL PRODUCTION (1) 0.161 0.161PLUS IMPORTS FROM OTHER SSA 0.008 0.000 0.008 0.000PLUS IMPORTS FROM OUTSIDE SSA 0.563 0.192 0.058 0.313LESS EXPORTS TO OTHER SSA (0.008) (0.008) 0.000 0.000LESS EXPORTS TO OUTSIDE SSA (0.021) (0.001) (0.005) (0.015)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 1.325 0.493 0.459 0.373DEMAND (FROM S&D) 1.325 0.492 0.460 0.3731. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries




Source: WORLD® runs, May 17th, 2009 Exhibit 4-17: 2020 Constrained Case 220: SSA products Balance (AFRI-4 Fuel Specifications)

Million barrels per day


SS

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ICA



S

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RIC

A

TO

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SO

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RIC

A

EA

ST

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FR

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Imports minus (Exports)GASOLINE 0.367 0.219 0.096 0.052DISTILLATES 0.542 0.183 0.061 0.298RESIDUAL FUELS (0.029) (0.028) (0.024) 0.023OTHER PRODUCTS (0.026) (0.024) (0.009) 0.006TOTAL PRODUCTS 0.854 0.350 0.124 0.379




Exhibit 4-18: 2020 Constrained Case 220: SSA Finished Products Supply Costs and Crack Spreads (AFRI-4 Fuels Specifications)







PADD-3 EUR-No PacHi


Crude Price


Diesel - Crude

HS Resid - IFO380


Diesel - Crude

HS Resid - Crude






In the 2020 constrained cases incremental investment costs to move to AFRI-4 in billions of 2007 dollars are:

• SSA $3.27 • AW $2.12 • AS $0.04 • AE $0.75

WORLD® MODEL RESULTS: BASE CASE AND 2020 CONSTRAINED CASES COMPARED Exhibits 4-19 through 4-22 allow a direct comparison of the two constrained cases. Exhibit 4-19 shows total product demand and net imports between the constrained cases and also shows the comparison with the Base Case, while Exhibit 4-20 shows the demand for gasoline and diesel and refinery crude oil runs. In the constrained cases all existing SSA refineries are protected and remain open. Consequently while net imports do grow when compared to the Base Case because of normal growth patterns net imports vary very slightly between the two 2020 cases. The same pattern holds true in the refinery crude oil runs. There is a slight variation but it is minimal. Exhibits 4-21 and 4-22 show the expansion patterns and the investment costs. The expansions represent atmospheric distillation expansions, not the secondary processing plants, and the data show that there is a greater expansion in the current fuel specifications case than in the AFRI-4 case. The investment dollars which represent total refinery investment (distillation capacity, secondary processing, and ancillary plants) are considerably higher in the AFRI-4 case. An interesting fact is that in both cases there is considerable expansion in Africa West, driven by population growth. The overall incremental cost for all of SSA of moving from the current specifications to the AFRI-4 standards amounts to $3.27 billion, with the majority of the investment costs applied in Africa West. As would be expected the lowest investment costs are in Africa South as the specifications for their transportation fuels are already advanced.



Exhibit 4-19: Base Case and 2020 Constrained Cases Results: Total Product Demand and Total Net Imports




224 2020 Constrained Current AFRI

Favorable

2.40

1.00

0.85

0.56

0.85

0.38

0.10

0.37

220 2020 Constrained AFRI-4

Favorable

2.40

1.00

0.85

0.56

0.85

0.35

0.12

0.38


Exhibit 4-20: Base Case and 2020 Constrained Cases Results: Total Gasoline and Diesel Demand and Refinery Crude Oil Runs





Favorable

1.64

0.69

0.60

0.35

1.35

0.62

0.53

0.20


Favorable

1.64

0.69

0.60

0.35

1.32

0.63

0.50

0.20




Exhibit 4-21: Base Case and 2020 Constrained Cases Results: Incremental Refinery Distillation Expansion and Total Investments





Favorable

0.322

0.207

0.057

0.058

$5.40

$3.19

$0.60

$1.61


Favorable

0.287

0.207

0.026

0.055

$8.67

$5.31

$1.00

$2.36


Exhibit 4-22: Base Case and 2020 Constrained Cases Results: Total Product Supply Cost and Gasoline and Diesel Supply Cost





Favorable

$67,920

$27,463

$24,345

$16,066

$46,560

$19,008

$17,416

$10,137


Favorable

$71,933

$29,438

$25,429

$17,066

$50,514

$20,917

$18,380

$11,217


Volume II-A: Final Refinery Study Report 2020 Open Market Cases


5: THE 2020 OPEN MARKET CASES

OVERVIEW ICF/EnSys has developed three open market cases for 2020 in which the future of the SSA refinery industry is examined. The three cases are:

• An open market case in which current transportation fuels specifications are maintained in 2020 and economic conditions are favorable for SSA: Case 221

• An open market case in which AFRI-4 transportation fuels specifications are assumed for SSA refineries in 2020 and economic conditions are favorable for SSA: Case 222

• An open market case in which AFRI-4 transportation fuels specifications are assumed for SSA in 2020 and economic conditions are unfavorable for SSA: Case 223

These 2020 cases are run as full “investment open” cases with respect to investments, i.e. total available global capacity equals the January 2008 base capacity plus projects under construction. The WORLD® model is allowed to invest on top of this with no restrictions. However, all competitive restrictions are removed. There is full and open competition between SSA existing refineries and also between SSA refineries and foreign export refineries. This is achieved by no longer forcing any refineries to run but rather allowing them to run or not based purely on economics.

OPEN MARKET CASES RESULTS

OPEN MARKET CASE (FAVORABLE TO SSA): CURRENT SPECIFICATIONS IN 2020: WORLD® CASE 221 Exhibit 5-1 shows the incremental capacity requirements facing SSA refiners in 2020. In this particular case the SSA refiners do not move to AFRI-4 standards but maintain the current fuel specifications. However, they are functioning in a fully open market, i.e., they have to complete for market share among themselves and against the rest of the world. This particular set of cases (the open market cases) will delineate the impact of the large export refineries in the Middle East and in India on the SSA refining sector plus the pressure from exports from Europe and the United States. In this particular case refinery expansions are driven by normal growth in the region. Total SSA atmospheric and vacuum distillation capacity increase, as do hydrogen plant capacity and sulfur plant capacity. All three regions build new capacity in this case with the largest amount, 200 mb/d (or 10 mmt/y) being built in Africa West17. This new capacity can be a new refinery, new plant at existing refineries, or some mix of the two. Africa East, as before, builds a new 50 mb/d (2.5 mmt/y) refinery to process Ugandan crude oil. New capacity in Africa South amounts to 38 mb/d (1.9mmt/y). Distillate desulfurization expands in all three demand regions (0.234 mmt/y in Africa West; 1.516 mmt/y in Africa South; and 1.147 mmt/y in Africa East). Naphtha desulfurization also expands in all regions. Africa East sees expansion of its FCC capacity (1.651 mmt/y) and Africa South which already has significant FCC capacity, sees an expansion of FCC gasoline desulfurization (0.156 mmt/y). 17 Currently the model sets a 200mb/d upper limit constraint on new capacity. Before the constraint was imposed new capacity being built in Africa West reached 500 -600mb/d. Given current economics we felt that we should be conservative.



As Exhibit 5-2 shows, in an open market case SSA refineries are subject to the full rigors of the global market. The level of refinery utilization falls when compared to the matching constrained case and the smaller, older refineries struggle. Exhibit 5-3 places SSA investment needs in the global context. Total SSA incremental investment needs are $5.3 billion as against a global (outside SSA) incremental investment of $97.9 billion. There is a small difference between these numbers and the current fuel specifications constrained case in which SSA investment is $5.4 billion with non-SSA global investment equaling $98.1 billion. The difference turns on what happens to the SSA older and simpler refineries. Exhibit 5-4 shows the SSA product production and refinery yields while Exhibit 5-5 shows refinery fuel use and losses. The differences between the open market case and the constrained case, where current fuel specifications are maintained can also be seen in Exhibits 5-6 and 5-7 which show the trade movements of gasoline and diesel. Compared to the constrained case, imports of gasoline from Europe/ Mediterranean to all three SSA regions jump slightly. Interestingly enough, the exhibit shows that in the open market case, compared to the constrained case, imports of gasoline from the Middle East/India export refineries remain almost flat in almost all SSA regions. The distillates trade to some extent matches this pattern. Imports from the Middle East/India decrease in the open market case to Africa West, remain flat to Africa South, and increase slightly to Africa East. Imports from Europe into Africa West remain flat but imports from North America into Africa West increase by 33,000 b/d. Exhibit 5-9 shows that in the open market case the spreads and the crack spreads strengthen slightly when compared to the constrained case.



Exhibit 5-1: 2020 Open Market Case 221: SSA Incremental Capacity Requirements (Current Fuel Specifications): Economically Favorable to SSA

Million tonnes per year FURTHER REFINERY CAPACITY ADDITIONS BY WORLD (OVER AND ABOVE CAPACITY BASE + PROJECTS ASSESSED TO BE ON-STREAM) million tonnes per year



CRUDE ATMOSPHERIC 1.154 0.000 0.925 0.229 0.925 0.229VACUUM DISTILLATION 0.431 0.000 0.359 0.073 0.359 0.073CAT CRACKING 0.000 0.000 0.000 0.000HYDROCRACKING 0.023 0.000 0.023 0.000 0.023DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000













Exhibit 5-2: 2020 Open Market Case 221: SSA Refinery Capacity and Throughput (Current Fuel Specifications): Economically

Favorable to SSA Million tonnes per year

REFINERY CAPACITY & THROUGHPUT SUMMARY REFINING & MERCHANT SUMMARY CAPACITY ADDITIONS - MM BBLS PER CD


BASE CAPACITY 1.453 0.681 0.538 0.234 0.144 0.047 0.445 0.045 0.000 0.053 0.485 0.000 0.024 0.090 0.120 0.000FIRM CONSTRUCTION 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000DEBOTTLENECKING ADDITIONS 0.023 0.000 0.019 0.005 0.019 0.005MAJOR NEW UNIT ADDITIONS 0.309 0.200 0.041 0.068 0.200 0.038 0.003 0.018 0.050TOTAL ADDITIONS OVER BASE 0.332 0.200 0.059 0.073 0.000 0.000 0.000 0.000 0.200 0.000 0.057 0.003 0.000 0.000 0.023 0.050TOTAL BASE + ADDITIONS 2020 1.785 0.881 0.597 0.307 0.144 0.047 0.445 0.045 0.200 0.053 0.542 0.003 0.024 0.090 0.143 0.050

0.000 0.000 0.000 0.000TOTAL CRUDE CAPACITY USED 2020 1.249 0.559 0.509 0.181 0.122 0.043 0.192 0.022 0.180 0.019 0.487 0.002 0.007 0.007 0.122 0.045Refinery Utilisation 70% 63% 85% 59% 85% 91% 43% 49% 90% 36% 90% 92% 31% 7% 85% 90% Source: WORLD® runs, May 17th, 2009



Exhibit 5-3: 2020 Open Market Case 221: SSA Incremental Investment Costs (Current Fuel Specifications): Economically Favorable to SSA $(2007) Billions


REVAMP 0.23$ -$ 0.23$ -$ 0.23$ DEBOTTLENECKING 0.02$ -$ 0.02$ 0.01$ 0.02$ 0.01$ MAJOR NEW UNITS 5.06$ 3.07$ 0.34$ 1.65$ 0.04$ 0.00$ 0.00$ 0.02$ 3.00$ 0.00$ 0.32$ 0.02$ 0.04$ 0.00$ 0.17$ 1.44$ TOTAL REFINING 5.32$ 3.07$ 0.59$ 1.66$ 0.04$ 0.00$ 0.00$ 0.02$ 3.00$ 0.00$ 0.57$ 0.02$ 0.04$ 0.00$ 0.18$ 1.44$


NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA



REFINING

SSA TOTAL


TOTALcheck




Exhibit 5-4: 2020 Open Market Case 221: SSA Refinery Product Production and Yields (Current Fuel Specifications): Economically Favorable to SSA

Million tonnes per year REFINERY PRODUCT PRODUCTION Case: 2020: - Favorable Open Market Current Specs million tonnes per year


TOTAL 59.87 27.31 23.92 8.62 5.95 2.04 8.89 1.02 9.41 0.90 22.91 0.11 0.35 0.31 5.75 2.22


Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWVolume %LPGs (includes LPG & propylene) 4.4% 3.1% 5.0% 6.6% 3.2% 1.2% 4.4% 0.8% 2.5% 0.6% 5.2% 5.3% 1.8% 3.2% 5.9% 9.6%Naphthas (including White Spirits & Solvents) 3.6% 6.6% 1.1% 1.1% 5.3% 9.7% 7.5% 8.0% 5.7% 4.3% 0.9% 0.0% 11.9% 9.6% 0.0% 1.2%Gasoline 22.4% 17.0% 28.6% 22.5% 17.5% 8.9% 25.3% 15.3% 10.8% 9.2% 29.4% 14.6% 6.0% 14.6% 18.4% 36.5%Aromatics 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.1% 0.0%Jet/Kerosene 16.9% 21.9% 16.6% 2.0% 26.7% 15.7% 13.9% 17.6% 28.2% 0.1% 17.3% 0.0% 10.2% 7.8% 1.9% 0.0%Gasoil/Diesel 35.7% 28.6% 38.3% 51.3% 22.3% 12.4% 38.9% 39.4% 25.3% 36.8% 38.2% 64.2% 22.7% 32.0% 58.2% 40.1%Residual Fuels 14.4% 22.0% 5.4% 15.4% 24.9% 52.1% 8.1% 17.7% 27.1% 49.1% 3.7% 14.2% 46.7% 31.4% 14.1% 11.3%Lubes & Waxes 0.9% 0.3% 1.9% 0.0% 0.0% 0.0% 0.8% 0.0% 0.0% 0.0% 1.9% 0.0% 0.0% 0.0% 0.0% 0.0%Bitumen 0.6% 0.1% 1.3% 0.0% 0.1% 0.0% 0.0% 0.0% 0.3% 0.0% 1.3% 0.0% 0.0% 0.0% 0.0% 0.0%Petroleum Coke 0.1% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0% 0.4% 0.2%Other 1.0% 0.4% 1.7% 1.0% 0.0% 0.0% 1.2% 1.3% 0.0% 0.0% 1.8% 1.3% 0.7% 1.4% 0.9% 1.1%




Exhibit 5-5: 2020 Open Market Case 221: SSA Refinery Fuel and Losses (Current Fuel Specifications): Economically Favorable to SSA

Million tonnes per year REFINERY FUEL & LOSS Case: 2020: - Favorable Open Market Current Specs million tonnes per year


SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWNatural Gas (Purchased) 0.604 0.604 0.000 0.000 0.037 0.000 0.000 0.000 0.567 0.000 0.000 0.000 0.000 0.000 0.000 0.000Still Gas (FOE) 0.679 0.232 0.326 0.122 0.063 0.015 0.047 0.000 0.108 0.006 0.319 0.002 0.000 0.001 0.077 0.045Hydrogen (FOE) 0.023 0.021 0.001 0.002 0.000 0.002 0.019 0.000 0.000 0.001 0.000 0.000 0.000 0.001 0.002 0.000Hydrogen Sulfide (FOE) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000C3s C4s 0.146 0.053 0.078 0.015 0.014 0.004 0.033 0.003 0.000 0.002 0.077 0.000 0.001 0.001 0.014 0.000Residual Fuel 3.143 1.126 1.622 0.396 0.240 0.068 0.748 0.070 0.000 0.036 1.580 0.007 0.017 0.018 0.274 0.088Other Streams 0.171 0.062 0.091 0.019 0.016 0.004 0.038 0.004 0.000 0.002 0.089 0.000 0.001 0.001 0.017 0.000FCC Coke 0.426 0.080 0.195 0.151 0.019 0.000 0.061 0.000 0.000 0.000 0.195 0.000 0.000 0.000 0.085 0.066Fuel Losses 0.491 0.361 0.091 0.039 0.035 0.005 0.300 0.011 0.011 0.005 0.087 0.000 0.003 0.003 0.031 0.003Evap/Other Losses 0.312 0.140 0.127 0.045 0.031 0.011 0.048 0.005 0.045 0.005 0.122 0.001 0.002 0.002 0.030 0.011Other losses 0.803 0.501 0.218 0.084 0.066 0.016 0.348 0.016 0.056 0.009 0.208 0.001 0.005 0.005 0.061 0.014Total 5.994 2.676 2.530 0.788 0.454 0.108 1.292 0.092 0.730 0.055 2.467 0.009 0.023 0.025 0.529 0.212Check 5.994 2.676 2.530 0.788 0.454 0.108 1.292 0.092 0.730 0.055 2.467 0.009 0.023 0.025 0.529 0.212




Exhibit 5-6: 2020 Open Market Case 221: SSA Gasoline Trade (Current Fuel Specifications): Economically Favorable to SSA Million barrels per day




WO

RLD

T

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AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

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H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA






TOTAL 23.571 11.381 0.356 0.223 0.088 4.046 1.351 6.126


SS

A

FR

ICA

T

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AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA




Exhibit 5-7: 2020 Open Market Case 221: SSA Distillates Trade (Current Fuel Specifications): Economically Favorable to SSA Million barrels per day



Exhibit 5-8: 2020 Open Market Case 221: SSA Products Balance (Current Fuel Specifications): Economically Favorable to SSA Million barrels per day


SS

A

FR

ICA

T

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AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA



S

AF

RIC

A

TO

TA

L

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

Imports minus (Exports)GASOLINE 0.399 0.263 0.087 0.049DISTILLATES 0.534 0.217 0.035 0.281RESIDUAL FUELS 0.012 (0.020) (0.009) 0.041OTHER PRODUCTS (0.002) (0.021) 0.003 0.016TOTAL PRODUCTS 0.942 0.439 0.116 0.387




Exhibit 5-9: 2020 Open Market Case 221: SSA Finished Products Supply Costs and Crack Spreads (Current Fuel Specifications): Economically Favorable to SSA







PADD-3 EUR-No PacHi


Crude Price


Diesel - Crude

HS Resid - IFO380


Diesel - Crude

HS Resid - Crude






2020 Open Market Incremental Distillate Desulfurization Capacity, mmt/y

• Current Specs: 2.896 • AFRI-4 Specs: 13.061

OPEN MARKET CASE (FAVORABLE TO SSA): AFRI-4 SPECIFICATIONS IN 2030: WORLD® CASE 222 This case is similar to the previous case except that those SSA refineries that are economically capable move to the AFRI-4 transportation fuels standards for both gasoline and diesel. This case can be compared to the previous open market Case 211 to gain an understanding of the incremental cost of moving to AFRI-4 standards. It can also be compared to the constrained Case 220 to observe the difference in the investment costs between a constrained market and an open market. Exhibit 5-10 shows the incremental capacity requirements to meet both increased demand and to move to the AFRI-4 standards while at the same time operating in the global market. Ultimately, it is a measure of the competitiveness of the SSA refineries on the global stage. Comparing this exhibit to that from Case 221, the open market in which current fuel specifications are kept, one can observe that this case requires:

• Less capacity: atmospheric and vacuum distillation, catalytic reforming • Much more capacity: FCC gasoline desulfurization, distillate desulfurization, hydrogen,

aromatics recovery. And, of course sulfur plant capacity increases substantially. The increase in the distillate desulfurization capacity is particularly large as can be seen in the text box. In the constrained case when all existing SSA refineries move to AFRI-4 standards the incremental distillate desulfurization capacity required is even larger; 17.68 mmt/y. New capacity is needed in Africa West (10 mmt/y) and is built in Africa East (2.5 mmt/y), but no new capacity is built in Africa South. Looking at Exhibit 5-11 which shows refinery utilization one can see that the impact of global competition on the SSA refineries is even more severe than in the open market current fuel specifications case. The investment needs of both the SSA region and the other global regions are seen in Exhibit 5-12. Investment requirements for SSA amount to $7.7 billion, and requirements for the rest of the world amount to $105.4 billion. This latter compares with $97.9 billion in the 2020 open market current fuel specifications case: an indication of the potential market opportunity that the rest of the world sees in SSA. Examining gasoline and distillates imports from the Middle East/India export refineries shown in Exhibits 5-15 and 5-16, and comparing the level of imports to that of the previous open market Case 221, it is apparent that imports in Africa West decline slightly, but in the case of Africa South imports of both gasoline and distillates climb, and in Africa East they climb sharply. This bears out the utilization levels shown in Exhibit 5-11. Exhibit 5-18 shows the spreads and the crack spreads. In this case, compared to the previous 2020 open market case all three crack spreads firm up particularly the 2-1-1.



Exhibit 5-10: 2020 Open Market Case 222: SSA Incremental Capacity Requirements (AFRI-4 Fuel Specifications): Economically Favorable to SSA

Million tonnes per year FURTHER REFINERY CAPACITY ADDITIONS BY WORLD (OVER AND ABOVE CAPACITY BASE + PROJECTS ASSESSED TO BE ON-STREAM) million tonnes per year



CRUDE ATMOSPHERIC 1.154 0.000 0.925 0.229 0.925 0.229VACUUM DISTILLATION 0.000 0.000 0.000 0.000CAT CRACKING 0.199 0.000 0.199 0.000 0.199HYDROCRACKING 0.023 0.000 0.023 0.000 0.023DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000













Exhibit 5-11: 2020 Open Market Case 222: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications): Economically Favorable to SSA

Million of tonnes per year REFINERY CAPACITY & THROUGHPUT SUMMARY million tonnes per year


BASE CAPACITY 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00FIRM CONSTRUCTION 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00DEBOTTLENECKING ADDITIONS 1.15 0.00 0.93 0.23 0.93 0.23MAJOR NEW UNIT ADDITIONS 12.62 10.00 0.12 2.50 10.00 0.12 2.50TOTAL ADDITIONS OVER BASE 13.78 10.00 1.05 2.73 0.00 0.00 0.00 0.00 10.00 0.00 1.05 0.00 0.00 0.00 0.23 2.50TOTAL BASE + ADDITIONS 2020 86.43 44.06 27.96 14.42 7.20 2.36 22.25 2.25 10.00 2.65 25.31 0.00 1.19 4.50 6.23 2.50




Exhibit 5-12: 2020 Open Market Case 222: SSA Incremental Investment Costs (AFRI-4 Fuel Specifications): Economically Favorable to SSA, $(2007) Billions


REVAMP 0.26$ -$ 0.26$ -$ 0.26$ DEBOTTLENECKING 0.04$ -$ 0.03$ 0.00$ 0.03$ 0.00$ MAJOR NEW UNITS 7.36$ 4.51$ 0.61$ 2.24$ 0.35$ 0.05$ 0.62$ 3.49$ 0.01$ 0.60$ 0.09$ 0.34$ 1.82$ TOTAL REFINING 7.65$ 4.51$ 0.90$ 2.25$ 0.35$ 0.05$ 0.62$ 3.49$ 0.01$ 0.89$ 0.09$ 0.34$ 1.82$


NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA



REFINING

SSA TOTAL


TOTALcheck




Exhibit 5-13: 2020 Open Market Case 222: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications):

Economically Favorable to SSA Millions of tonnes per year

REFINERY PRODUCT PRODUCTION Case: 2020: - Favorable Open Market AFRI-4 million tonnes per year


TOTAL 56.36 27.01 21.88 7.46 5.90 2.03 9.65 0.00 9.43 0.65 21.22 0.00 0.33 0.00 5.01 2.14


Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWVolume %LPGs (includes LPG & propylene) 4.5% 3.0% 4.8% 9.3% 3.6% 1.1% 3.8% 2.3% 0.9% 4.9% 1.1% 9.1% 10.7%Naphthas (including White Spirits & Solvents) 3.7% 5.8% 1.4% 2.6% 5.2% 12.0% 8.8% 1.8% 3.8% 1.3% 15.9% 1.1% 4.0%Gasoline 23.7% 20.8% 27.8% 21.9% 18.3% 9.9% 27.9% 17.4% 8.1% 28.5% 2.0% 17.8% 34.2%Aromatics 0.7% 0.3% 1.2% 0.9% 0.3% 0.2% 0.0% 0.5% 0.1% 1.2% 0.2% 1.4% 0.0%Jet/Kerosene 15.2% 18.5% 15.6% 2.2% 21.4% 18.1% 20.9% 14.3% 11.6% 15.8% 23.2% 0.9% 2.0%Gasoil/Diesel 33.5% 30.5% 35.2% 39.4% 27.2% 10.7% 21.9% 45.7% 20.6% 35.6% 9.5% 45.7% 28.9%Residual Fuels 15.3% 20.3% 7.5% 20.1% 23.9% 48.0% 14.6% 18.0% 54.9% 6.1% 47.4% 21.8% 11.7%Lubes & Waxes 1.2% 0.3% 2.0% 2.1% 0.0% 0.0% 0.7% 0.0% 0.0% 2.1% 0.0% 0.0% 7.4%Bitumen 0.6% 0.1% 1.4% 0.0% 0.0% 0.0% 0.3% 0.0% 0.0% 1.4% 0.0% 0.0% 0.0%Petroleum Coke 0.1% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.4% 0.1%Other 1.4% 0.4% 2.8% 1.4% 0.0% 0.0% 1.0% 0.0% 0.0% 2.9% 0.8% 1.6% 1.1%




Exhibit 5-14: 2020 Open Market Case 222: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications): Economically Favorable to SSA

Million tonnes per year REFINERY FUEL & LOSS Case: 2020: - Favorable Open Market AFRI-4 million tonnes per year






Exhibit 5-15: 2020 Open Market Case 222: SSA Gasoline Trade (AFRI-4 Fuel Specifications): Economically Favorable to SSA Million barrels per day




WO

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NO

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AM

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RIC

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ICA

EU

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PE

/ M

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SU

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E

AS

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TOTAL 23.571 11.381 0.356 0.223 0.088 4.046 1.351 6.126


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.267 0.112 0.122 0.033LOCAL CTL/GTL PRODUCTION (1) 0.087 0.087PLUS IMPORTS FROM OTHER SSA 0.001 0.000 0.001 0.000PLUS IMPORTS FROM OUTSIDE SSA 0.408 0.244 0.101 0.064LESS EXPORTS TO OTHER SSA (0.001) 0.000 0.000 (0.001)LESS EXPORTS TO OUTSIDE SSA (0.007) 0.000 0.000 (0.007)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.754 0.356 0.310 0.088DEMAND (FROM S&D) 0.753 0.357 0.309 0.0871. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries





Exhibit 5-16: 2020 Open Market Case 222: SSA Distillates Trade (AFRI-4 Fuel Specifications): Economically Favorable to SSA Million barrels per day


WO

RLD

T

OT

AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

A

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA






TOTAL 35.408 10.022 0.493 0.298 0.373 10.447 2.300 11.475


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

LOCAL REFINERY PRODUCTION 0.549 0.265 0.222 0.062LOCAL CTL/GTL PRODUCTION (1) 0.161 0.161PLUS IMPORTS FROM OTHER SSA 0.002 0.000 0.002 0.000PLUS IMPORTS FROM OUTSIDE SSA 0.631 0.230 0.075 0.326LESS EXPORTS TO OTHER SSA (0.002) (0.002) 0.000 0.000LESS EXPORTS TO OUTSIDE SSA (0.017) 0.000 (0.002) (0.015)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 1.325 0.493 0.459 0.373DEMAND (FROM S&D) 1.325 0.492 0.460 0.3731. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries





Exhibit 5-17: 2020 Open Market Case 222: SSA Products Balance (AFRI-4 Fuel Specifications): Economically Favorable to SSA Million barrels per day


SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA



S

AF

RIC

A

TO

TA

L

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

Imports minus (Exports)GASOLINE 0.400 0.244 0.101 0.055DISTILLATES 0.614 0.228 0.075 0.311RESIDUAL FUELS 0.012 (0.010) (0.016) 0.038OTHER PRODUCTS (0.014) (0.018) (0.007) 0.010TOTAL PRODUCTS 1.013 0.444 0.154 0.415




Exhibit 5-18: 2020 Open Market Case 222: SSA Finished Products Supply Costs and Crack Spreads (AFRI-4 Fuel Specifications): Economically Favorable to SSA







PADD-3 EUR-No PacHi


Crude Price


Diesel - Crude

HS Resid - IFO380


Diesel - Crude

HS Resid - Crude






OPEN MARKET CASE (UNFAVORABLE TO SSA): AFRI-4 SPECIFICATIONS IN 2020: WORLD— CASE 223 Given the current adverse economic conditions, ICF/EnSys decided towards the end of the modeling exercise to run one additional 2020 case to examine the impact on the SSA refining sector of severe economic conditions. Four key parameters were identified (See Exhibit 5-19). Case 222 was used as the basis and the key parameters were varied. There are, of course, numerous parameters that affect outcome, but the four were deemed sufficiently key that varying them would adequately capture the impact.

Exhibit 5-19: Favorable versus Unfavorable Cases Parameters

Cases 221 & 222 Favorable

Case 223 Unfavorable

Annualized SSA Product Demand Growth to 2020

3.7% p.a. 2.0% p.a.

Tanker Freight Rates Base Lower

Investment Costs Location Factor

Base Higher

Regional Natural Gas Prices Base Higher

Exhibits 5-21 and 5-22, the incremental and the total refinery capacity, illustrate the impact of poor economic conditions on the SSA refining sector. Capacity is down; utilization falls; a new refinery in Africa South is not built; and only Africa South maintains a reasonable average refinery utilization rate. Africa West, because of its population growth continues to need new capacity but in this case the capacity falls from 200 mb/d (10 mmt/y) to 124 mb/d (6.2 mmt/y). Looking at Exhibit 5-23 investment in SSA falls from $7.65 billion in the economically favorable case to $6.19 billion in this case. There is a slight growth in Africa East but not enough to counteract the decline elsewhere which is particularly marked in Africa West. Investment in the non-SSA global market also declines. The decline in demand not only affects the indigenous refineries but imports of products also fall across all the regions (see Exhibits 5-26 and 5-27. This is further reflected in the weakening of the crack spreads (see Exhibit 5-29). This may be extreme as demand was cut for the entire projection period. More than likely, demand will start to grow strongly again out towards the mid period. However, the case is illustrative of what the impact of a global recession is on the SSA refining sector.


ICF International 105 World Bank

Exhibit 5-20: 2020 Open Market Case 223: SSA Incremental Capacity Requirements (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA

Million tonnes per year






CRUDE ATMOSPHERIC 0.342 0.000 0.113 0.229 0.113 0.229VACUUM DISTILLATION 0.000 0.000 0.000 0.000CAT CRACKING 0.000 0.000 0.000 0.000HYDROCRACKING 0.000 0.000 0.000 0.000DELAYED COKING 0.000 0.000 0.000 0.000FLUID COKING 0.000













Exhibit 5-21: 2020 Open Market Case 223: SSA Refinery Capacity and Throughput (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA






BASE CAPACITY 72.66 34.06 26.91 11.69 7.20 2.36 22.25 2.25 0.00 2.65 24.26 0.00 1.19 4.50 6.00 0.00FIRM CONSTRUCTION 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00DEBOTTLENECKING ADDITIONS 0.34 0.00 0.11 0.23 0.11 0.23MAJOR NEW UNIT ADDITIONS 8.69 6.19 0.00 2.50 6.19 2.50TOTAL ADDITIONS OVER BASE 9.03 6.19 0.11 2.73 0.00 0.00 0.00 0.00 6.19 0.00 0.11 0.00 0.00 0.00 0.23 2.50TOTAL BASE + ADDITIONS 2020 81.69 40.24 27.03 14.42 7.20 2.36 22.25 2.25 6.19 2.65 24.38 0.00 1.19 4.50 6.23 2.50




Exhibit 5-22: 2020 Open Market Case 223: SSA Incremental Investment Costs (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA, $(2007) Billions




REVAMP 0.23$ -$ 0.23$ -$ 0.23$ DEBOTTLENECKING 0.01$ -$ 0.00$ 0.00$ 0.00$ 0.00$ MAJOR NEW UNITS 5.95$ 2.98$ 0.41$ 2.56$ 0.11$ 0.03$ 0.33$ 2.52$ 0.00$ 0.41$ 0.10$ 0.36$ 2.10$ TOTAL REFINING 6.19$ 2.98$ 0.64$ 2.56$ 0.11$ 0.03$ 0.33$ 2.52$ 0.00$ 0.64$ 0.10$ 0.36$ 2.10$


NORTH & SOUTH

AMERICA

EUROPE / MED / FSU

MIDDLE EAST / ASIA




TOTALcheck

REFINING

SSA TOTAL




Exhibit 5-23: 2020 Open Market Case 223: SSA Refinery Product Production and Yields (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA




REFINERY PRODUCT PRODUCTION Case: 2020: - Un-Favorable Open Market AFRI-4 million tonnes per year


TOTAL 48.87 20.49 20.91 7.45 3.51 1.21 9.78 0.00 5.99 0.43 20.48 0.00 0.33 0.00 5.01 2.13


Refinery Yields SSA-TOTAL AW-Total AS-Total AE-Total AW-SGI AW-CAM AW-NIG AW-COG AW-NEW AS-ANG AS-Saf AS-NEW AE-ZAM AE-KEN AE-SUD AE-NEWVolume %LPGs (includes LPG & propylene) 4.7% 3.4% 4.6% 8.8% 5.8% 1.6% 3.3% 2.4% 1.7% 4.6% 1.1% 8.7% 10.3%Naphthas (including White Spirits & Solvents) 4.1% 7.2% 1.7% 2.7% 4.6% 16.8% 7.5% 6.2% 3.2% 1.6% 15.9% 1.2% 4.0%Gasoline 23.9% 20.4% 27.9% 22.5% 20.8% 13.8% 25.6% 13.1% 8.1% 28.3% 2.0% 18.6% 34.5%Aromatics 0.5% 0.1% 0.7% 0.8% 0.3% 0.2% 0.0% 0.1% 0.1% 0.8% 0.2% 1.2% 0.0%Jet/Kerosene 15.2% 17.9% 17.0% 3.0% 24.3% 22.4% 18.6% 12.1% 7.3% 17.2% 23.2% 2.1% 2.0%Gasoil/Diesel 30.8% 26.9% 32.1% 38.2% 29.7% 10.0% 15.0% 47.9% 23.1% 32.3% 9.5% 43.9% 28.9%Residual Fuels 16.7% 22.0% 10.2% 20.7% 14.5% 35.2% 25.4% 18.2% 56.5% 9.2% 47.4% 22.7% 11.7%Lubes & Waxes 1.4% 0.4% 2.1% 2.1% 0.0% 0.0% 0.7% 0.0% 0.0% 2.2% 0.0% 0.0% 7.5%Bitumen 1.1% 1.5% 1.2% 0.0% 0.0% 0.0% 3.1% 0.0% 0.0% 1.2% 0.0% 0.0% 0.0%Petroleum Coke 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.4% 0.1%Other 1.4% 0.3% 2.4% 1.1% 0.0% 0.0% 0.7% 0.0% 0.0% 2.5% 0.8% 1.1% 1.1%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 100.0% 100.0% 100.0% 0.0% 100.0% 0.0% 100.0% 100.0%




Exhibit 5-24: 2020 Open Market Case 223: SSA Refinery Fuel and Losses (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA




REFINERY FUEL & LOSS Case: 2020: - Un-Favorable Open Market AFRI-4 million tonnes per yearG H I J W K D E O P Q Y





Exhibit 5-25: 2020 Open Market Case 223: SSA Gasoline Trade (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA Million barrels per day




WO

RLD

TO

TAL

NO

RTH

&

S

OU

TH

AM

ER

ICA W

ES

T A

FRIC

A

SO

UTH

A

FRIC

A

EA

ST

AFR

ICA

EU

RO

PE

/ M

ED

/ FS

U

MID

DLE

E

AS

T

AS

IA






TOTAL 23.389 11.381 0.274 0.143 0.068 4.046 1.351 6.126


SS

A

FRIC

A

TOTA

L

WE

ST

AFR

ICA

SO

UTH

A

FRIC

A

EA

ST

AFR

ICA

LOCAL REFINERY PRODUCTION 0.234 0.084 0.117 0.033LOCAL CTL/GTL PRODUCTION (1) 0.087 0.087PLUS IMPORTS FROM OTHER SSA 0.003 0.000 0.001 0.002PLUS IMPORTS FROM OUTSIDE SSA 0.258 0.191 0.028 0.040LESS EXPORTS TO OTHER SSA (0.003) (0.000) (0.002) (0.001)LESS EXPORTS TO OUTSIDE SSA (0.007) (0.000) 0.000 (0.007)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 0.572 0.274 0.230 0.068DEMAND (FROM S&D) 0.571 0.274 0.229 0.0681. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries




Source: WORLD® runs, May 17th, 2009 Exhibit 5-26: 2020 Open Market Case 223: SSA Distillates Trade (AFRI-4 Fuel Specifications): Economically Unfavorable to

SSA Million barrels per day




WO

RLD

T

OT

AL

NO

RT

H

&

SO

UT

H

AM

ER

ICA W

ES

T

AF

RIC

A

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

EU

RO

PE

/ M

ED

/ F

SU

MID

DLE

E

AS

T

AS

IA






TOTAL 35.108 10.022 0.380 0.193 0.291 10.447 2.300 11.475


SS

A

FRIC

A

TOT

AL

WE

ST

A

FRIC

A

SO

UTH

A

FRIC

A

EA

ST

AFR

ICA

LOCAL REFINERY PRODUCTION 0.450 0.183 0.205 0.061LOCAL CTL/GTL PRODUCTION (1) 0.161 0.161PLUS IMPORTS FROM OTHER SSA 0.050 0.000 0.001 0.049PLUS IMPORTS FROM OUTSIDE SSA 0.435 0.201 0.038 0.196LESS EXPORTS TO OTHER SSA (0.050) (0.001) (0.049) 0.000LESS EXPORTS TO OUTSIDE SSA (0.021) (0.004) (0.002) (0.015)=DEMAND AS PRODUCTION-EXPORT+IMPORTS 1.025 0.380 0.354 0.291DEMAND (FROM S&D) 1.027 0.381 0.355 0.2911. Note this is finished product production ex South Africa CTL and GTL plants. Production ex Escravos GTL plant is currently shown as intermediate streams to refineries




Source: WORLD® runs, May 17th, 2009 Exhibit 5-27: 2020 Open Market Case 223: SSA Products Balance (AFRI-4 Fuel Specifications): Economically Unfavorable to

SSA Million barrels per day




SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA



SS

A

FR

ICA

T

OT

AL

WE

ST

A

FR

ICA

SO

UT

H

AF

RIC

A

EA

ST

A

FR

ICA

Imports minus (Exports)GASOLINE 0.251 0.190 0.027 0.035DISTILLATES 0.414 0.197 (0.012) 0.230RESIDUAL FUELS (0.025) (0.014) (0.031) 0.020OTHER PRODUCTS (0.039) (0.024) (0.018) 0.002TOTAL PRODUCTS 0.601 0.349 (0.034) 0.287



Exhibit 5-28: 2020 Open Market Case 223: SSA Finished Supply Costs and Crack Spreads (AFRI-4 Fuel Specifications): Economically Unfavorable to SSA









PADD-3 EUR-No PacHi


Crude Price


Diesel - Crude

HS Resid - IFO380


Diesel - Crude

HS Resid - Crude






WORLD® MODEL RESULTS: BASE CASE AND 2020 OPEN MARKET CASES COMPARED Exhibits 5-29 through 5-32 allow a comparison of the three open market cases and a comparison with the Base Case. Exhibit 5-29 summarizes the change in demand that occurs in the economically unfavorable case: this is also reflected in the decline in net imports. The exhibit shows the greater vulnerability of the SSA refineries as they move to AFRI-4 standards and net imports increase. What these cases show is that it is extremely difficult for the small, simple refineries to survive in the global market. All of these outcomes are reflected in Exhibit 5-30 which shows comparable patterns in gasoline and diesel demand and refinery crude oil runs. Exhibits 5-31 and 5-32 show refinery expansions, investment costs and product supply costs. Interestingly enough, new capacity is needed in Africa West no matter what the case. The volume of the capacity declines in the economically unfavorable scenario but it is still demanded.



Exhibit 5-29: Base Case and 2020 Open Market Cases Results: Total Product Demand and Total Net Imports




221 2020 Open Market Current AFRI

Favorable

2.40

1.00

0.85

0.56

0.94

0.44

012

0.39


Favorable

2.40

1.00

0.85

0.56

1.01

0.44

0.15

0.41


Unfavorable

1.85

0.77

0.64

0.44

0.60

0.35

(0.03)

0.29

Source: WORLD® model runs, May 17th, 2009

Exhibit 5-30: Base Case and 2020 Open Market Cases Results: Total Gasoline and Diesel Demand and Refinery Crude Oil Runs





Favorable

1.64

0.69

0.60

0.35

1.25

0.56

0.51

0.18


Favorable

1.64

0.69

0.60

0.35

1.16

0.54

0.47

0.16


Unfavorable

1.24

0.53

0.45

0.27

1.00

0.40

0.45

0.16




Exhibit 5-31: Base Case and 2020 Open Market Cases Results: Incremental Refinery Distillation Expansions and Incremental Total Investments





Favorable

0.332

0.200

0.059

0.073

$5.32

$3.07

$0.59

$1.66


Favorable

0.276

0.200

0.021

0.055

$7.65

$4.51

$0.90

$2.25


Unfavorable

0.181

0.124

0.002

0.055

$6.19

$2.98

$0.64

$2.56


Exhibit 5-32: Base Case and 2020 Open Market Cases Results: Total Product Supply Costs and AFRI Gasoline and Diesel Supply Cost




221 2020 Open Marketd Current AFRI

Favorable

$68,047

$27,528

$24,384

$16,136

$46,674

$19,066

$17,445

$10,163


Favorable

$72,026

$29,463

$25,457

$17,106

$50,564

$20,934

$18,403

$11,227


Unfavorable

$53,620

$22,222

$18,413

$12,986

$37,317

$15,751

$13,014

$8,552


Volume II-A: Final Refinery Study Report Cost Benefit Analysis and Conclusions


The impact of moving to AFRI-4 fuel specifications in an open market

• Small, old, inefficient refineries have trouble functioning

• Refineries that can make the change, despite the higher capital costs face widening refinery margins and increased revenue.

The incremental costs of keeping all SSA refineries functioning is $1.02 billion

6: COST BENEFIT ANALYSIS AND CONCLUSIONS

SUMMARY OF IMPACTS ON SSA REFINING ECONOMICS Exhibits 6-1 through 6-3 below summarize the effects of moving to AFRI-4 on the economics of SSA refineries in the three SSA regions. As discussed elsewhere in the report, the generally low prices for gasoline relative to crude oil reflect the sustained gasoline/naphtha surplus that is part of the global outlook; equally, the large distillate premiums reflect the projection for sustained distillate growth both in SSA and throughout the rest of the world. As also discussed, we are not fully convinced these differentials will necessarily obtain, as factors varying from demand shift to refinery technology may act to mitigate them. Nonetheless, with this in mind, the outlook is for generally poor margins for gasoline, and strong margins for distillate; also for narrow differentials for crude oil over residual fuel oil, because of combined coking surplus and low heavy crude production in the medium term. The high distillate premiums over crude oil act to support refining margins in general, although in a lopsided way with the upside coming almost entirely from distillate. Relatively narrow – although gradually widening (negative) residual fuel oil differentials versus crude oil act, at least in the shorter term, to support hydro-skimming margins. Residual fuel oil spreads are narrower in Africa East as this region imports residual fuel oil, while Africa South and Africa West export this product. With respect to the main thrust of the study though, the impacts of moving to AFRI-4, the price and crack spreads show clearly that raising the quality of SSA gasoline and diesel in turn raises their prices and, with that, has a material effect on SSA refining margins. Depending on the scenario, crack spreads improve by $5 or more per barrel (bbl) and hydro-skimming margins by up to $3/bbl. These results apply even in those cases where there are unfavorable underlying economics and they apply in all three regions. The implication is that, for those refineries that are able to make AFRI-4 products, they will enjoy stronger margins by virtue of the switch to AFRI-4. Again, the key here is economic ability to make the investments and other changes necessary to make AFRI-4 products and, as other aspects of the same results have shown, that ability looks practical for regional refineries that are efficient, not simple and preferably large but poses major challenges for refineries that are not.

Volume II-A: Final Refinery Study Report Cost Benefit Analysis and Conclusion

ICF International 130

Exhibit 6-1: Africa West Price and Crack Spreads (relative to Bonny Light)

S/bbl 2010 2015 2015 2020 2020 2020 2020 2020

Basis Base Market Market Base Base Market Market Market Conditions Unfavorable Unfavorable Favorable Favorable Favorable Favorable Unfavorable AFRI Specs Current Current AFRI-4 Current AFRI-4 Current AFRI-4 AFRI-4 Spreads vs. Crude Gasoline – Crude Oil $0.89 $2.12 $2.93 ($3.69) $1.38 ($3.55) $1.41 $0.74 Diesel – Crude Oil $12.81 $10.76 $17.05 $12.82 $22.60 $13.10 $22.64 $19.96 HS Residual – Crude Oil ($3.25) ($4.58) ($6.76) ($6.87) ($7.05) ($7.01) ($7.33) ($8.30) Crack Spreads 3-2-1 (approx FCC cracking) $4.87 $2.17 $7.64 $1.81 $8.45 $2.00 $8.49 $7.14 2-1-1 (approx HCR cracking) $6.85 $4.32 $9.99 $4.56 $11.99 $4.78 $12.03 $10.35 4-1-1-2 (approx hydro-skimming) $1.80 ($0.13) $1.61 ($1.15) $2.47 ($1.11) $2.35 $1.03



Source: Calculated from WORLD® runs, May 17, 2009

Exhibit 6-2: Africa South Price and Crack Spreads (relative to Saudi Light)

S/bbl 2010 2015 2015 2020 2020 2020 2020 2020

Basis Base Market Market Base Base Market Market Market Conditions Unfavorable Unfavorable Favorable Favorable Favorable Favorable Unfavorable AFRI Specs Current Current AFRI-4 Current AFRI-4 Current AFRI-4 AFRI-4 Spreads vs. Crude Gasoline – Crude Oil $1.07 $0.37 $1.97 ($0.37) $3.15 ($0.14) $3.28 $1.68 Diesel – Crude Oil $8.64 $11.03 $16.27 $19.42 $24.50 $19.48 $24.56 $18.92 HS Residual – Crude Oil ($8.15) ($6.66) ($7.08) ($6.96) ($7.65) ($6.40) ($7.65) ($8.82) Crack Spreads 3-2-1 (approx FCC cracking) $3.59 $3.93 $6.74 $6.23 $10.26 $6.40 $10.37 $7.43



2-1-1 (approx HCR cracking) $4.85 $5.70 $19.12 $9.53 $13.82 $9.67 $13.92 $10.30 4-1-1-2 (approx hydro-skimming) ($1.65) ($0.48) $1.02 $1.29 $3.09 $1.63 $3.13 $0.74

Source: Calculated from WORLD® runs, May 17, 2009 Exhibit 6-3: Africa East Price and Crack Spreads (relative to Saudi Light)

S/bbl 2010 2015 2015 2020 2020 2020 2020 2020

Basis Base Market Market Base Base Market Market Market Conditions Unfavorable Unfavorable Favorable Favorable Favorable Favorable Unfavorable AFRI Specs Current Current AFRI-4 Current AFRI-4 Current AFRI-4 AFRI-4 Spreads vs. Crude Gasoline – Crude Oil ($0.86) ($1.85) $3.40 ($1.93) $2.63 ($1.78) $2.72 $2.40 Diesel – Crude Oil $10.35 $11.14 $18.40 $13.56 $22.79 $13.76 $22.84 $21.08 HS Residual – Crude Oil ($3.86) ($0.67) ($1.07) ($3.09) ($2.96) ($3.09) ($2.93) ($2.74) Crack Spreads



3-2-1 (approx FCC cracking) $2.88 2.48 $8.40 $3.23 $9.35 $3.40 $9.43 $8.63 2-1-1 (approx HCR cracking) $4.75 $4.64 $10.90 $5.82 $12.71 $5.99 $12.78 $11.74 4-1-1-2 (approx hydro-skimming) ($0.44) $1.99 $4.92 $1.37 $4.88 $1.47 $4.92 $4.50

Source: Calculated from WORLD® runs, May 17, 2009



The incremental costs to consumers of moving to AFRI-4 gasoline and diesel in 2020 in an open market range from ¢3.66 to ¢7.09 /litre

INCREMENTAL SUPPLY COSTS OF AFRI-4 Exhibit 6-4 summarizes the crucial impacts of all of the open market projected cases from 2015 and 2020. The exhibit also shows the cost to SSA governments of supporting the small, older refineries that will not be able, by themselves, to move to AFRI-4. The numbers in the exhibit represent the incremental costs when compared to the matching cases for 2015 and 2020 in which the current fuel specifications were kept. In general, when SSA refineries move to AFRI-4 specifications overall crude oil runs decline even in the constrained case. In part this represents the impact of moving to AFRI-4 and an open market on the troubled small refineries, and in part this represents higher imports. The exhibit also shows the impact in 2020 of a constrained market and of unfavorable economic conditions. These numbers are matched by the columns showing SSA refinery distillation expansions and refinery investments. Again these numbers are the incremental numbers when compared to maintaining the current fuel specifications into the future. Costs are higher in 2020 as one would expect as refiners not only have to meet the AFRI-4 specifications but to also meet the growth of normal demand driven by population and economic growth. Exhibit 6-5 shows further details of the open market 2015 and 2020 runs: product demand, net product imports and refinery crude oil runs are shown. These are not incremental numbers but show the evolution over time when faced with increasing demand on the African continent driven by population growth, economic growth, and to a certain extent by ‘pent up’ demand finally satisfied by improve infrastructure in many places. Exhibits 6-6 and 6-7 summarize the costs of the gasoline and diesel as the SSA Refiners move to AFRI-4 fuel specifications. Exhibit 6-6 show the incremental supply costs not only for AFRI-4 gasoline and diesel but also for all products. Major changes at refineries do not only affect the products in question but trickle through to affect all the output. Exhibit 6-7 shows the incremental supply costs that consumers will face for their AFRI-4 gasoline and diesel. The costs are presented as both $/bbl and cents per litre.



Exhibit 6-4: Incremental Supply Costs of AFRI-4: Refinery Crude Oil Runs, Refinery Expansions, and Refinery Investments

Refinery Crude Oil Runs Thousand b/d

Refinery Distillation Expansions Thousand b/d

Refinery Investments $(2007) billion

Year Issue SSA Total

Africa West

Africa South

Africa East

SSA Total

Africa West

Africa South

Africa East

SSA Total

Africa West

Africa South

Africa East

2015 Open Market

Unfavorable

(70) (0.04) (0.02) (0.01) 00 00 00 00 1.24 0.45 0.26 0.53

2020 Constrained (30) 0.01 (0.03) (0.00) 34 00 (31) (4) 3.27 2.13 0.40 0.75 2020 Open

Market (80) (0.02) (0.04) (0.02) 57 00 (38) (18) 2.34 1.44 0.31 0.59

2020 Incremental Cost of

Constrained Market

160 90 30 0.04 12 7 5 00 1.02 0.8 0.10 0.11

2020 Impacts of Unfavorable Conditions

(160) (140) (20) 0.00 (95) (76) (19) 00 (1.47) (1.52) (0.26) 0.31

Source: WORLD® Model runs, May 17th, 2009 Exhibit 6-5: Evolution of SSA Product Demand, Refinery Crude oil Runs, and Net Product Imports, 2010-2020

Product Demand Million b/d

Product Net Imports Million b/d


Favorable Favorable Favorable SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East

2010 1.55 0.61 0.60 0.34 0.35 0.24 (0.08) 0.20 0.99 0.37 0.47 0.14 2015 2.06 0.82 0.79 0.45 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2020 2.40 1.00 0.85 0.56 1.01 0.44 0.15 0.41 1.16 0.54 0.47 0.16

Increase 2020 over 2010 0.86 0.39 0.24 0.23 0.66 0.21 0.24 0.21 0.18 0.16 (0.00) 0.02

Unfavorable Unfavorable Unfavorable SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East SSA Total Africa West Africa South Africa East

2010 1.55 0.61 0.60 0.34 0.35 0.24 (0.08) 0.20 0.99 0.37 0.47 0.14 2015 1.70 0.69 0.63 0.38 0.61 0.38 (0.01) 0.24 0.88 0.30 0.42 0.15 2020 1.85 0.77 0.64 0.44 0.60 0.35 (0.03) 0.29 1.00 0.40 0.45 0.16

Increase 2020 over 2010 0.30 0.16 0.04 0.10 0.25 0.11 0.05 0.09 0.02 0.03 (0.03) 0.02



Source: WORLD® Model runs, May 17th, 2009 Exhibit 6-6: Incremental Supply Costs of AFRI-4: Total Product Supply Costs and Gasoline and Diesel Supply Costs

Total Product Supply Cost $(2007) Million/year

AFRI Gasoline + Diesel Supply Cost $(2007) Million/year


Africa West

Africa South

Africa East

SSA Total

Africa West

Africa South

Africa East

2015 Open Market

Unfavorable

$2,100

$927

$569

$603

$2,139

$981

$548

$611

2020 Constrained $4,059 $1,976 $1,8084 $999 $3,954 $1,909 $964 $1,080 2020 Open

Market

$3,979

$1,935

$1,094

$970

$3,890

$1,868

$958

$1,064 2020 Incremental

Cost of Constrained

Market

($93)

($24)

($28)

($41)

($50)

($17)

($23)

($10)

2020 Impacts of Unfavorable Conditions

($18,406)

($7,241)

($7,044)

($4,121)

($3,247)

($183)

($388)

($2,675)

Source: WORLD® Model runs, May 17th, 2009

Exhibit 6-7: Incremental Supply Costs to the Consumer of AFRI-4 Gasoline and Diesel

8 AFRI Gasoline + Diesel Supply Costs $/bbl

AFRI Gasoline + Diesel Cents/litre


Africa West

Africa South

Africa East

SSA Total

Africa West

Africa South

Africa East

2015 Open Market

Unfavorable

$5.09 $5.63 $3.43 $7.06 4.27 4.72 2.87 5.92

2020 Constrained $6.61 $7.61 $4.39 $8.45 5.56 6.39 3.69 7.09 2020 Open

Market $6.51 $7.45 $4.37 $8.33 5.46 6.25 3.66 6.99

2020 Incremental Cost of

Constrained Market

($0.08) ($0.07) ($0.10) ($0.08) (0.07) (0.06) (0.09) (0.07)



Source: WORLD® Model runs, May 17th, 2009



COST BENEFIT ANALYSIS The final step in the refinery study is to compare the costs facing the refinery sector in SSA to the monetary value of the health benefits accruing to the populace from reducing pollution emanating from the sulfur in transportation fuels. This is done in a formal cost/benefit analysis. Exhibit 6-8 shows the summary results from the health study. There were two scenarios in the Health study: Scenario 1 looked at the impact of only reducing sulfur in the transportation fuels. There was a benefit but it is relatively small. Scenario 2 looks at both reducing the sulfur in fuels and improving the emission controls on vehicles and establishing an inspection and maintenance program. In terms of comparing the refinery investment costs and the health benefits this analysis has focused on Scenario 2. Although Scenario 2 is, perhaps overly optimistic nevertheless it was felt to be more realistic. There is substantial information from many countries indicating that as regards vehicle pollution the optimal approach is to both reduce the sulfur in fuels and improve the pollution controls on the vehicle and to enforce both requirements. The full details of the health analysis can be found in the Health Study which is printed separately.18 Africa South’s costs and benefits, which are the costs and benefits of moving to AFRI-4 standrads, are reflective of the fact that South African fuels already meet EU standards.

Exhibit 6-8: Monetary Valuation of the Health Benefits

Total Annual Benefit Millions $2007

5-Year NPV Billions $2007

10-Year NPV Billions $2007

SSA West Region Base Case - - Scenario 1 640 2.6 4.5 Scenario 2 4,500 18 32

SSA East Region Base Case - - Scenario 1 340 1.4 2.4 Scenario 2 1,300 5.3 9.0

SSA South Region Base Case - - Scenario 1 0 0 0 Scenario 2 252 1.0 1.8

Exhibit 6-9 summarizes the total investment costs from the various cases facing the SSA refining sector to both meet normal demand growth and to meet the requirement of moving up the AFRI scale to AFRI-4 fuel specifications. Exhibit 5-4 separates out the investment costs of moving to AFRI-4 specifications compared to the current AFRI specifications. Also included in this exhibit is a line showing the incremental cost of moving to AFRI-4 in a constrained versus an open market and a line showing the incremental difference in moving to AFRI-4 against a favorable economic situation versus a more unfavorable situation.

18 ICF International, Final Report, Sub-Saharan Africa Refinery Project: Health Report, Volume I-A



Exhibit 6-9: Total Refinery Sector Investments from the Eight Cases (Billions of 2007$)

Case Year Description AFRI Specifications

SSA-Total

AW-Total

AS-Total

AE-Total

210 2010 Base Current 0.06 0.01 0.05 - 215 2015 Open Market

Unfavorable Current 1.89 0.02 0.28 1.60

216 2015 Open market Unfavorable

AFRI-4 3.14 0.47 0.54 2.13

224 2020 Constrained Current 5.40 3.19 0.60 1.61 220 2020 Constrained AFRI-4 8.67 5.31 1.00 2.36 221 2020 Open Market Current 5.32 3.07 0.59 1.66 222 2020 Open Market AFRI-4 7.65 4.51 0.90 2.25 223 2020 Open Market

Unfavorable AFRI-4 6.19 2.98 0.64 2.56

Exhibit 6-10: Incremental Costs for the Refinery Sector to Move to AFRI-4 Fuel Specifications (Billions of 2007$)

Case Year Description SSA-Total AW-Total AS-Total AE-Total 215 vs 216 2015 Open Market

Unfavorable 1.25 0.45 0.26 0.53

224 vs.220 2020 Constrained 3.27 2.12 0.40 0.75 221 vs. 222 2020 Open Market 2.33 1.44 0.31 0.59

2020 220 vs 222 2020 Constrained vs.

Open Market 1.02 0.80 0.10 0.11

222 vs.223 2020 Open Market: Fav. vs. Unfav>

1.46 1.53 0.26 (0.31)

The costs and benefits were compared on the basis of the cumulative refinery sector investment costs and the health benefits over the 10 year time line out to 2020. As an additional set of cases, the 2015 cases, were also run the comparison with these cases was over a 5 year time-line out to 2015. The numbers were drawn from the open market case (Case 216 for 2015 and 222 for 2020). Scenario 2 from the Health Report was used as the comparison with the refinery costs. The net present value (NPV) was calculated using the U.S. EPA’s approved 7 percent discount rate.19 Exhibit 6-11 shows the results. The results are expressed in billions of 2007 dollars. The exhibit shows that on an NPV basis the benefits to the health of the population of SSA during the period examined far exceed the investment costs required for the refineries to move to the AFRI-4 fuel specifications. Even in Africa South the health benefits overcome the investment costs. The spread is sufficiently large that even if the refinery investment costs were higher, due to greater investment risk premia, the benefits would still outweigh the costs.

19 Both the World Bank and UNEP evaluated the discount rate and approved it.



Exhibit 6-11 Net Present Value of Refinery Supply Costs versus Health Benefits over 10 Years

Billions 2007 dollars SSA Total West Africa East Africa South Africa Refinery Investment

Cost to 2015 $2.76 $0.47 $2.13 $0.59

Health Benefits over 5 years

$25 $18 $5.3 $1.0

Refinery Investment Costs to 2020s

$6.14 $4.96 $2.48 $0.99

Health Benefits over 10 years

$42 $32 $9.0 $1.8

CONCLUSIONS AND RECOMMENDATIONS Overall, the results of the combined studies, despite the problems with the data, send a message that there are substantial health benefits that will accrue to the SSA populations by making the necessary refinery investments to improve SSA transportation fuels and bring them all into line with the AFRI-4 standards. By moving to a unified, harmonized official standard throughout the SSA region problems arising from smuggling and poor quality imports can be avoided to the benefit of the population, particularly the poor. What are the impacts on the refining sector of moving to AFRI-4 standards? At the beginning of this study a number of points were stressed by the ARA Steering Committee:

• SSA refineries are small and in some cases old and with some exceptions have small markets • If SSA refineries are not protected will they be swamped by imports from the large Middle

East/India export refineries that are essentially subsidized by their governments? • SSA countries face many pressing concerns so will the investment requirements be

prohibitive? At the beginning of the study the only defined specifications for transportation fuels publicly available were the official government specifications. Many of these are old and the specifications are such that the fuels do not even equal the lowest of the AFRI standards. ICF/EnSys’ initial concern was that the cost of moving from very poor quality transportation fuels to the modern clean products that are increasingly being demanded, combined with the fact that there were few economies of scale in the SSA refineries, would result in high and prohibitive costs. When the individual refineries supplied us with their specifications for gasoline and diesel it was immediately apparent that the majority had already moved substantially up the AFRI scale. This radically changed our estimate of the necessary capital investment and technology required. The refinery processing impacts depend in part on the SSA region. The impacts are a function of the standards of the transportation fuels already being made; a function of the technology already installed, particularly FCC capacity; and particularly a function of the types of crude oil being used. West Africa, in general, has good quality sweet crude oil, compared to the imported sour Middle Eastern crude oil used in South and East Africa.



Incremental product costs are lowest in Africa South as that region already has refineries with advanced configurations and largely AFRI-3 fuel standards so that the step to AFRI-4 is the smallest. Exhibit 6-12 shows the incremental unit costs in all three SSA demand regions for the AFRI-4 transportation fuels for both the constrained cases and the open market cases. In line with the previous exhibits that show that the incremental cost for moving to AFRI-4 in the constrained case is approximately $1.02 billion more than in the open market case, Exhibit 6.12 shows that the incremental unit costs are also higher.

Exhibit 6-12: Incremental Unit Supply Costs for AFRI-4 Fuels in the Constrained and the Open Markets Cases

AFRI-4 Gasoline + Diesel Supply Cost Case Year Units SAA Total Africa

West Africa South

Africa East

Constrained 2020 $/barrel $/tonne

$5.56 $44.26

$6.39 $50.86

$3.69 $29.37

$7.09 $56.44

Open Market

2020 $/barrel $/tonne

$5.46 $43.46

$6.25 $49.75

$3.66 $29.13

$6.99 $55.64

As both the Health and this Refinery study have pointed out, there are considerable uncertainties largely driven by the problems of the data. Nevertheless both studies provide a methodology for accessing the costs and benefits of improving the quality of the transportation fuels. Both studies looked out only to 2020. Nevertheless, all indications are that SSA will continue to grow and with that will come further urbanization and vehicle use. Currently, and during the 10 year period to 2020 there were a number of regions examined where the air pollution was dominated by indoor pollution and by road dust. However, moving past 2020 this is likely to change and vehicle pollution, if nothing is done, will likely become the predominant source of air pollution. What the analysis shows is that moving to AFRI-4 AND improving the vehicle fleet provides a very large health benefit: a benefit that is in line with other studies in China and Mexico. If the only change is the improvement in the fuels then the benefits are much smaller, and in the case of Africa South which already has AFRI-3 level fuels there is very little benefit. The investment costs to move to AFRI-$ are large and in an open market there are small, older refineries that will not be able to make it on their own. Nevertheless, for the refineries that can economically make the investments the outcome is is substantially improved refinery margins and revenue. This raises questions about the 2015 cases. These cases were run to see whether or not there were benefits from moving more quickly to the cleaner fuels. There are benefits that accrue from moving more quickly. The health benefits are smaller but still positive and the refinery margins are wider but not as positive as in the 2020 case. However, the synergism between the vehicle and the fuels raises some questions about the time-line. The benefits from simply moving to AFRI-4 only (Health Scenario 1) are very slight and in the case of Africa South they are negative. Given the short time line (5 years) it is debatable whether the SSA countries can achieve Health Scenario 2 and the accompanying legislation and the financing and move to AFRI-4.



Since the largest benefit to human health is from moving to AFRI-4 fuel standards and improving vehicles and establishing an I/M program ICF/EnSys believes that the target date should be 2020 What the open market cases show is that a number of the existing SSA refineries more than hold their own against the foreign export refineries. SSA refineries that do well in the global context usually:

• Are larger, • Have invested over time and are more complex, • Are more efficient, • Have access to good quality local crude oils, and • Have access to a larger market or have a niche market.

In addition, given the projected demand growth there appears to be the opportunity for new (or expanded) refinery capacity between 200,000 and 400,000 b/d depending on economic circumstances. Despite the higher cost of AFRI-4 fuels for those refineries that can make the new fuels margins are better and the revenue generated will be higher.

Refineries that do not have these characteristics are already facing problems and challenges and these challenges will only grow greater as time passes. For the older, smaller refineries that are already struggling SSA policy makers will have to decide on their future. If governments choose to protect these refineries and to upgrade them so that they can also make the AFRI-4 fuels they (the governments) will face an additional cost of $1.02 billion. This study has shown that the estimates of the potential for health benefits, when more stringent fuel standards are combined with more stringent vehicle requirements, far outweigh the investment costs facing refineries over time. Certainly some refineries will have great trouble, but the more economically viable refineries may segue into regional centers and have a more profitable revenue stream. What the study has also shown is that:

• SSA refineries are already halfway up the AFRI standards, mitigating the size of the required future investments, and

• Some of the SSA refineries are capable of functioning in the larger context of the global market.



\\\\

MAIN RECOMMENDATIONS:

• Governments should instigate a sustained effort to update official fuel specifications to reflect current refineries’ actual production.

• Governments should consider upgrading the official fuel specifications in their country to

AFRI-4 by 2015 • Refiners should consider the time required to implement the investments for adapting the

SSA refineries that economically can to produce transport fuels at harmonized AFRI-4 specifications by 2015.

• In parallel, Governments should adopt and enforce regulatory measures to improve the

vehicles fleets such as: o All imported gasoline powered cars must have functioning catalytic

converters o Establish an inspection and maintenance program o Encourage the phase out of old, highly polluting vehicles

• To reduce the uncertainties confronted in this study Governments, International Agencies,

and Technical experts should conduct additional research with respect to: o Data on emissions in major urban centers o Examine the appropriate methodology for estimating health costs and

benefits in developing nations o Clarify data on product demand

• The refining modeling indicates that major growth both in expansion of existing refineries

and new regional refineries is to be found in the West African/Angola region. Lesser, but still positive growth is to be found in East Africa due to Ugandan crude oil. More focused technical studies should concentrate on these regions.

• Open market policies should be expanded to allow the economic refineries to improve

their revenue as they move to AFRI-4 standards. • Policy makers need to decide the future of the small refiners such as Senegal, Congo,

Gabon, and Kenya. The study indicates the magnitude of the costs of maintaining these refineries.

Volume II-A: Final Refinery Study Report Bibliography


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final report sub-saharan africa refinery project - world bank

Documents