South African oil, gas and petrochemicals

Oil and gas

BMI has reported that South Africa has big potential when it comes to unconventional and deepwater resources and they offer significant upside risk to long term production prospects. The company has however said that a sustained lower oil price could see these types of high risk, high cost ventures brought under strain. It is the uncertainty surrounding the amended petroleum bill that also threatens interest in South Africa’s upstream sector.

When it comes to the downstream sector, BMI has said that structural weaknesses will drive a growing refined fuels import dependency, as domestic fuels fail to keep pace. Refining capacity in the country remains severely under-utilised, as retailers are opting for increasingly competitive refined fuel imports above domestic products. On a global scale, South African refiners are at a major disadvantage, due to a lack of domestic crude production, ageing infrastructure as well as inflated wage costs and frequent power outages. For refined fuel consumption, BMI ha said that consumption is highly price elastic, so the sector is currently seeing a strong increase in demand for gasoline and diesel and this will continue.

Looking at gas, consumption is expected to remain heavily constrained, due to low domestic production growth and a continued lack of import alternatives.

Petrochemicals

BMI has said that South Africa’s polymers markets are in contraction due to the weakening of the rand and the downgrading of the country’s credit rating. It has also said that the failure of the rand to recover and the deterioration in particular in the second quarter of last year, has made it difficult to do business, particularly importing raw materials. The level of demand for petrochemicals is expected to be similar to that of 2013, but the market segment is deteriorating with little upside and significant uncertainty.

Edited from report briefs by Claira Lloyd

Read the article online at: https://www.oilfieldtechnology.com/exploration/25022015/oil-gas-petchem-sa-bmi/