Cote d'Ivoire's San Pedro Port's proposed addition of a refined fuel terminal is, in our view, a strong strategic move. With cocoa production set to continue to see stagnant growth, at best, over the next five years, the port's decision will allow it to diversify into other markets. The choice of a refined fuel products terminal is particularly advantageous, as the sizeable oil and gas resources in the deepwater plays off the Cote d'Ivoire coast are currently attracting significant international interest. However we warn that ongoing domestic tensions and border disputes with Ghana could deter oil companies from investing and damaging plans for a refined oil terminal.
The Port of San Pedro on the Ivory Coast has announced its plan to diversify away from cocoa exports and into refined fuel products. The new refined fuel terminal will have a capacity of 50,000 tonnes of fuel products. Construction is to start in 2014 and will take three years. Costing CFA30bn, the development will be funded by the state oil company Petroci and the Autonomous Port of San Pedro. Refined products will be shipped from the Societe Ivoirienne de Rafinage Refinery in Abidjan.
The port is the world leader for cocoa exports, shipping over 50% of the total global cocoa crop every year. In 2013, San Pedro's combined cocoa and coffee throughput was over 690,500 tonnes. However, we do not expect this level to be maintained into 2014. We expect the volume of cocoa exported to experience a decline over the coming year, as we forecast the 2013/14 harvest to slump by 4.4% y-o-y, to 1.42mn tonnes. Although this is only a moderate drop (down from 1.49mn tonnes in 2012), it is a substantial reduction on 2011 levels of 1.51mn tonnes, and we expect this downwards trend to continue, resulting in smaller cargos for San Pedro in the future. We base this projection on a number of factors which we believe will combine to foster mediocre production prospects at best. These include poor weather, limited revenues and inadequate fertiliser usage.
|Mediocre Growth Prospects For Cocoa Production|
|Cote d' Ivoire Cocoa Production ('000 tonnes)|
...Countered By Oil Opportunities
In light of this stagnant cocoa production, we take a positive view of the proposed expansion into the oil and gas sector. The port is planning on capitalising on rising domestic west coast demand for oil (the area needs around 3mn tonnes of fuel a year at present, and we expect this to grow due to an expanding population), and refined fuel exports to Liberia, Guinea and Mali.
BMI highlights that here are a large number of potential deepwater oil and gas reserves off the coast of Cote d'Ivoire, running along the West Africa Transform Margin. We believe these reserves could equal those of neighbouring Ghana and, if properly developed, could enable the country to rival Ghana as a key emerging oil producer for the region. At present we estimate proven reserves to be in the region of 100mn barrels of oil and 28bn cubic metres of gas, and this is attracting a great deal of interest from oil companies. If further exploration occurs, we believe this figure will increase substantially.
With the refinery on the coast at Abidjan, San Pedro is ideally located to cater to the inland demand from western Cote d'Ivoire, and the landlocked countries beyond. Refined fuel could be shipped down the coast from Abidjan to San Pedro, unloaded and transported to Liberia, Mali and Guinea.
Moreover, we view the involvement of the state oil company, Petroci, as evidence of the existence of a demand which is not being catered to at present. Petroci's funding of the project will, we feel, ensure a steady supply of oil products through the terminal once it is completed.
Political Instability Deters Exploration
However, there are downside risks to this planned development, which centre around the threat of instability in the country. There are various sources of potential unrest, stemming from political tensions and ongoing maritime border disputes with Ghana (regarding the potentially oil-rich waters). These could deter potential incoming oil companies from undertaking the extremely costly offshore deepwater exploration projects needed to boost Abidjan's refined oil products production and thereby ensure the sizeable cargos destined for the San Pedro refined oil products terminal.