Closing The Refining Gap
BMI View: Sonangol has finally started the construction of the Lobito refinery. After numerous delays, production is now scheduled to start from 2017. Additional refining capacity will ease the country ' s growing dependence on fuel imports. However, we forecast sustained growth in demand will out pace domestic refined product output again by 2019.
Angola is set to remain the second largest oil producer in Africa for the foreseeable future. We estimate that the value of Angola ' s crude oil net exports could reach about US$75bn for 2012 and make up 93% of the country ' s total exports. Similarly, oil activities in 2012 will account for 76% of the government ' s fiscal revenue. T his impressive upstream growth is not , however , channel led completely into the economy . One reason is the weakness of Angola's downstream sector , which forces the country to increasingly rely on imports of refined products as population and economic growth pushes fuel demand higher.
Angola's downstream activity is currently concentrated on a single refinery located in Luanda. The plant, operated by state-owned Sonangol , had an initial capacity of 39,000 barrels per day (b/d) and was upgraded to 65,000b/d in 2010. We forecast the demand of refined products to grow from 104,000b/d in 2012 to more than 226,000b/d in 2021, illustrating the need for Angola to extensively increase its refining capacity in order to optimise the use of its own hydrocarbon s resources.
|Catch Up If You Can|
|Angola Refined Products Consumption, Production & Net Imports, 2000-2021 ('000b/d)|
Sonangol announced in early December that it has started construction of the long awaited Lobito refinery. The facility has been planned since the early 2000s and was initially scheduled to be finished in 2012. The global economic downturn in late 2000s forced public authorities to initially push back its opening date to 2014. Following further difficulty faced in raising capital, the refinery is now expected to start only in 2017 with an initial capacity of 115,000b/d, increasing to 200,000b/d in the following year. Our forecast integrates this schedule, but we nonetheless see a large downside risk created by possible delays in the construction of the plant, as many steps are still to be fulfilled. Indeed, Sonangol has yet to issue tenders for engineering contracts to provide all the required units to complete the facility.
Short Lived Energy Independence
The aim of increasing Angola's refining capacity is to provide citizens with access to cheaper petroleum products. At present, the country has to import expensive fuels at global prices that are currently at historical highs. Locally produced refined products can be sold at a lower price as domestic refineries can use local and cheaper crude supplies for refining feedstock. It will also help alleviate the country's import burden.
According to our forecast, however, it seems that the Lobito refinery will only provide a short-lived relief to Angola's fuel import bill. By 2019, we believe the country will return to being a net importer of refined products as domestic demand continues to grow. Considering the numerous obstacles and delays the Lobito project faced, it would be difficult for another downstream development to offset completely the growing demand for the foreseeable future.