BMI View: Gabon's plan to build a new 50,000b/d refinery to replace the ageing 24,000b/d Port Gentil plant is a necessity if the country wants to avoid becoming a net fuels importer. The plant would actually see the country's exports expand significantly. This would also be Samsung Engineering's first project in Sub-Saharan giving it the opportunity to acquire knowledge about the local terrain and establish its reputation on the continent.
Gabon's Energy and Environment adviser Gin Park announced that the Gabonese government had signed a memorandum of understanding (MoU) with South Korea's Samsung for the construction of a 50,000 barrels-a-day (b/d) refinery in the country. The US$1bn project will be built in Port Gentil, the country's oil hub. Construction is scheduled to be completed before the end of 2016 and South Korean experts are, according to Park, already in Gabon to begin the feasibility study.
In terms of the MoU, construction will be done by Samsung while maintenance will be shared between the South Korean firm and the Gabonese government. Negotiations for a final deal are still under way though the project is one of the public and private partnerships (PPPs) embraced by the government in its 'Emerging Gabon Initiative'. Although no precise breakdown of the facility's product slate has been given, Park said that 'the main product of the refinery will be diesel for domestic market and the other products will be for other markets, and the heavy fuel oil will be for the European market'.
Necessity Is The Mother Of Construction
Gabon's only refinery, a 24,000b/d plant located in Port Gentil, was built in 1967. The facility, operated by the Socit Gabonaise de Raffinage (SOGARA), is 44% owned by French major Total while the Gabonese government controls 25%. The rest is owned by fuel distributor Petro Gabon, Italy's Eni and Portofino Assets, a unit of Johannesburg-based Metallon Corporation. Feedstock is derived from local crude produced by Total Gabon, Royal Dutch Shell and Hess.
The SOCARA refinery currently produces close to 21,000b/d, up from 18,574b/d in 2010 and 11,646b/d in 2009, and output is likely to continue its gradual ramp up towards name-plate capacity. Due to Gabon's low domestic demand, which BMI estimates at 18,631b/d in 2011, the country is a net refined products exporter. Although consumption is set to remain low, with BMI forecasting it to hit 21,828b/d by 2021, Gabon could become a relatively large importer by 2016, when the SOCARA refinery is scheduled to shut down.
Due to the current plant's old age, the decision to build a new refinery in the same site makes economic sense. However, sticking to the 2016 deadline will be of crucial importance if the authorities want to avoid resorting to costly fuels imports. With the new plant having a nameplate capacity of 50,000b/d, the country's export potential could reach 23,000b/d if the current 85% utilisation rate is maintained. Therefore, this offers significant upside potential to our forecast which currently anticipates less than 1,000b/d in refined fuels exports for 2016.
Samsung's First African Pawn
The Port Gentil project, while small, is also an opportunity for Samsung. The facility will in all likelihood be built by the conglomerate's engineering, procurement and construction (EPC) arm Samsung Engineering. This subsidiary has already won several large contracts - worth over US$1bn - in the Middle East and North Africa and has several ongoing or completed projects in Asia and the Americas.
The refinery in Gabon is admittedly much smaller than many of the other contracts Samsung Engineering is involved in. These include the US$14bn construction of the 400,000b/d SATORP project in Saudi Arabia, the US$8.4bn expansion to 417,000b/d of the 120,000b/d Ruwais refinery in the UAE and the US$1.2bn 30,000 b/d expansion of the 300,000b/d Skikda refinery in Algeria. While SOCARA is not Samsung's biggest project, it is its first in Sub-Saharan Africa and will therefore provide the company with the opportunity to enter a whole new region, gain knowledge of the local terrain and thus establish its reputation on the continent.
Copyright 2012 Business Monitor International Ltd. All Rights Reserved.
(Originally published May 1, 2012, in BMI Middle East and Africa Oil and Gas Insights.)