Tag Archives: downstream

Refinery Progress Highlight’s Egypt’s Domestic Downstream Push

ImageAfter years of delays and challenges from inside the country and out, Egypt’s new refinery project appears poised to finally break ground and it could not come at a better time.

In the two years since the collapse of the government of Hosni Mubarak, Egypt has faced significant challenges to meeting domestic energy needs thanks to increasing demand, an unsustainable state subsidy program and an overall loss of confidence on the part of production partners. In an effort to cut down on costly imports, the country’s new government has pushed for substitution options, the most notable of which is a $3.7 billion refinery projects helmed by Citadel Capital.

First proposed in 2007, the project has encountered a series of obstacles to completion including a wider global economic slowdown that made securing needed financing all but impossible. More importantly, Egypt became the poster case for the Arab Spring, spurring the collapse of the long-standing government of Mubarak. This development pulled the rug out from under the country’s business environment, again, making financing a difficult goal to reach.

Still, while financing the project took far longer than they expected, Citadel was able to close the process last summer, clearing the way for the project finally moving forward. The facility will produce more than 4.2 million tons of refined product a year, halving the country’s imports and saving the government an expected $300 million during that time. Most importantly for a country facing an increasingly frustrated population that has faced blackouts and cuts in services due to fuel shortages, the facility means a long-awaited boost in downstream capacity.

Citadel was able to meet financing needs with the help of a number of outside actors that looked past the country’s current uncertainty. These have included the African Development Bank, the European Investment Bank and Qatar who have pledged billions in investment and support for Egypt over the last several months.

Other efforts to curb dependence on expensive imports at a time of political and economic volatility have included possible new trade deals with Iraq and a soft credit crude agreement with Libya. 

Image: Arabian Business

Originally Posted: Newsbase Downstream Monitor, All Rights Reserved

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Algeria’s Downstream Deficit on Display

The impact of Algeria’s downstream deficit became clear this month as a tighter European refining market threatened a series of gasoline deliveries scheduled for mid-October. Despite substantial oil and gas reserves and high export rates to the United States and Europe, Algeria does not currently offer the downstream capacity to meet growing domestic needs. Recent refinery closures and site maintenance in Europe and a sharp increase in car ownership locally have exacerbated the country’s energy challenges by reducing accessibility to refined products, according to a Platts report and comments from Energy Minister Youcef Yousfi.

As of January 2012, Algeria boasted a total crude oil refining capacity of 450,000 bpd at four facilities. This capacity is not on track to meet rising domestic demand for refined materials, promoting an increase reliance on imports, which rose from 1.3 million tones in 2010 to 2.3 million tones in 2011. This situation has hardly been helped this year with the six-month closure of their largest facility, the 335,000 bpd refinery at Skikda in July 2012.

To address this deficit, Algeria has launched a series of renovation efforts at each of the facilities with an aim of being able to increase output to meet domestic demand by 2014. These efforts include the construction of a Liquefied Natural Gas (LNG) plant and three Liquefied Gas Facilities at the Skikda location, an expansion of 20,000 bpd at the Algiers location, an increase of 30,000bpd at the Arzew location and a plan to build three new LNG trains at the Hassi Messaoud site.

In addition to improving sites to meet current demand, Algeria must also prepare for expanded production efforts, including both traditional, unconventional shale and the country’s push into offshore exploration. Recently, the country’s government and state-backed oil and gas firm Sonatrach unveiled an expanded $80 billion energy investment plan, with about $60 billion set aside for exploration efforts. The government also revised the country’s hydrocarbon laws to appeal to foreign firms willing to support investment into shale projects.

According to a Bloomberg report, Sonatrach CEO Abdelhamid Zerguine has stated that the North African country offers an estimated 2 trillion cubic meters of shale gas which they base on tests carried out in three provinces over 180,000 sq. km.

Image: Arabian Oil and Gas

Originally Posted: Newsbase Downstream MEA Monitor

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Algeria Explores Downstream Investment Plans

Saddled by increasing energy demand and public spending, as well as steadily declining production levels, Algeria and its state-backed firm Sonatrach have outlined an increased budget for the next five years, with much dedicated to improving downstream efforts.

Algeria recently announced a $12 billion increase in their budget dedicated to the energy sector over the next five years, adding to the $68 billion already set aside for infrastructure and downstream efforts. Much of the additional funds have been set aside for increasing Algeria’s refining capabilities and investing in non-traditional efforts, both of which will require high initial investments but are intended to decrease the country’s dependence on imports.

The importance of improving the country’s most important revenue stream has become increasingly important in recent months as the new Algerian leaders seeks out ways to avoid the kind of public protests that led to the collapse of governments in Tunisia and Libya. Like Morocco, Algeria stepped up public spending to quell growing opposition but now face pressure in sustaining such spending. Algeria currently looks to oil and gas revenue for the majority of their export revenue and much of their government spending.

Algeria’s need for greater refining capabilities has become especially clear in recent weeks as purchases of gasoline and other refined goods spiked amid increased demand and in anticipation of a six-month closure of one of the country’s largest plants. Currently responsible for nearly 335,000 bpd, the Skikda refinery will be closed over the next six months for planned repairs. Overall, planned refurbishments to Algerian downstream efforts are predicted to increase output from 1.2 million bpd to 1.5 million bpd within five years.

To help fund the effort, Sonatrach have announced their plans to return to exploration and production efforts in neighboring Libya and increase foreign investment through a revision of the country’s energy policies. The country has recently seen a decline in international interest in energy efforts due to what has been called a hostile investment environment. According to Reuters, the amendments to Algeria’s energy law will introduce “tax incentives that aim to boost offshore exploration and attract foreign companies that can bring technology know-how for the development of unconventional reserves.”

Cross Posted with Newsbase’s MENA Downstream Observer

Image: Energy D-V

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Libyan Downstream Looks for Support

As Shell joins the ranks of foreign firms reassessing their presence in Libya amid political and security instability, the country’s downstream ability to attract needed investment and modernization financing has become increasingly questionable. Although general production levels are on schedule to meet pre-conflict levels this summer, Libya’s ability to move beyond that amount and make better use of the continent’s largest proven reserve of crude is far less certain in the eyes of potential production partners.

While both sides of last year’s conflict expressed their intent in protecting the country’s valuable production and refining infrastructure, many facilities were damaged during the violence that led to the collapse of the Gadaffi government. Far more remains outdated and unable to meet growing needs.

At the center of the debate is the country’s continued delay in re-opening the 220,000bpd Ras Lanuf refinery. While operations at the country’s second largest Zawiya Oil Refinery have reportedly returned to 100 percent, concern about stability and disputes with local authorities have kept the needed Ras Lanuf from operating at full capacity.

These concerns stem from growing public protest against new and existing contracts and uncertainty about the country’s political well-being. The latter of these issues has been further complicated by the recent news that national elections would be postponed from this month to next. Meanwhile, according to a Dow Jones report, the country’s energy sector has been slowed and in some cases stopped completely, by an ongoing review process and increasingly anxious opposition to agreements with US and European firms.

The resulting landscape has left many foreign partners, who would provide needed funding for infrastructure development and downstream expansion, wary about returning or entering the Libyan marketplace. In March, State Oil Co. of Azerbaijan, or Socar, denied reports that they would enter into agreements with Libya to expand their refinery and petrol station presence in the country, citing ongoing instability as the reason.

Image: Bloomberg

Originally Posted in Newsbase’s Downstream Monitor, All Rights Reserved

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