Poten: African Sweet Crude Oil Exports Expected to Grow

Posted By Tony Sanchez / February 11, 2019 / Cargo News / 0 Comments

February 11, 2019

Representing the majority of the crude oil exported from Africa, low sulphur will become ‘increasingly desirable’ in the coming years, Poten & Partners said. 

As explained, the demand for the so-called sweet crude oil will increase as IMO sulphur cap 2020 will force the majority of the shipping industry to switch to low sulphur bunker fuels — with less than 0.5% sulphur.

“Growing markets in Asia will be the primary destinations for these volumes and we expect that VLCCs and Suezmaxes will benefit the most from any additional ton-miles,” according to the ship brokerage and consulting company.

The African oil industry has seen significant changes in recent years as one of their primary export markets, the United States, has ramped up oil production and, as a result, reduced imports from Africa dramatically. According to the International Energy Agency (IEA), Africa produces about 7.25 million barrels per day (Mb/d), predominantly in West and North Africa. The largest producers are OPEC members Nigeria and Angola, with daily output of 1.66 Mb/d and 1.48 Mb/d, respectively.

Nigerian production has been volatile in recent years due to frequent militant attacks on oil infrastructure since the presidential amnesty program stopped in 2016. By December 2018, production had recovered and is expected to grow further this year. The Egina offshore oil field, operated by French major Total, started production in January and is estimated to reach 200 Kb/d later this year.

Oil production in Angola, the second largest producer in Africa, has declined gradually over the last two years because its oil fields are ageing, and the country has failed to attract new investment. According to the Angolan government, production could fall to 1 Mb/d by 2023 without new capital and the government is taking steps to make the country more attractive for foreign investors. However, it is likely that production will continue to decline, at least initially, Poten believes.

West Africa also has several smaller producers such as Gabon, Equatorial Guinea, Ghana and Congo. The IEA expects production in Gabon and Equatorial Guinea, a recent addition to OPEC, to continue to slide. Gabon’s oil industry faces additional uncertainty because of a coup attempt last month.

Production in Ghana and Congo is expected to increase, but the volumes of these smaller producers are too small to offset the developments in Nigeria and Angola. As US production increased, more West African oil has moved to Asia. Shipment data indicates that in 2018 Asian destinations accounted for 54% of West African exports, compared to only 44% in 2014. As a result, VLCCs have increased their market share relative to Suezmax tankers in West African exports.

While West Africa represents the majority of African production, changes in North Africa also have a significant impact on the tanker market, Poten added.

Algeria and Libya remain significant producers and exporters, each producing slightly more than 1 Mb/d. Algerian output is more or less steady, but Libyan production and exports have started to come back from their collapse.

Libya’s production doubled over the last 2 years, although occasional eruptions of fighting still affect production and export capacity. The largest oil field in Libya remains closed after local fighters captured it last December, reducing exports by about 0.3 Mb/d in January. Production is likely to remain volatile, the company said.

North African exports have increased significantly because of the recovery of Libyan production and exports. About 40% of the total exports remain in the Mediterranean, which is down from over 50% as recently as 2016. Asia has been a notable growth destination — especially China which has bought growing volumes from Libya.

Some 90% of these cargoes are lifted on Suezmax tankers. Exports to NW Europe have also increased, especially to the UK offsetting reduced exports to Canada.

Source: (World Maritime News)

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