South Africa Petrochemicals Report Q3 2009

South Africa Petrochemicals Report Q3 2009

Future expansion of the South African petrochemicals industry will be limited if the financial crisis
affects plans for new refineries, thereby limiting potential naphtha feedstock availability, according to
BMI’s latest South Africa Petrochemicals Report.
BMI expects no expansion in refinery capacity following consolidation, although continuing enlargement
of synthetic oil capacity is expected. This will limit potential naphtha feedstock availability. Drako Oil
and Energy has proposed a 350,000 barrels a day (b/d) refinery at Richards Bay in the KwaZulu-Natal
province, with start-up scheduled by end-2012, a date that has been repeatedly moved back. BMI doubts
it will achieve financial backing for the projected US$6bn cost of the facility. PetroSA is also planning a
crude oil refinery in Coega, Port Elizabeth. At 400,000b/d potential crude distillation capacity, the plant
could cost US$11bn and is expected to come onstream in 2014, but whether this deadline is realistic
remains to be seen. PetroSA is seeking partners, citing Sasol as a potential investor. A final investment
decision for the project will be taken around 2010/2011.
BMI cautions that if key refinery infrastructure projects are postponed or fail to get off the ground, there
could be significant setbacks to the expansion of the petrochemicals industry. So far, dominant industry
players have said that they remain committed to their big growth projects. But if the global economy does
not begin to recover in 2010 as many expect, BMI believes that more companies will be forced to
preserve cash and make further cuts to spending programmes.
In terms of market conditions, South African producers are likely to experience depressed demand for the
rest of 2009, and even though conditions will improve in 2010, they are expected to remain challenging.
The global petrochemicals industry is facing a cyclical downturn that is being exacerbated by the
deepening global economic downturn and an anticipated glut of new supply. South African producers will
feel the impact of a fall in consumer demand, particularly from the automotive and construction sectors.
They will also come under pressure as a surge of new worldwide supply comes online in the Middle East
and Asia. This is expected to weigh on the full-year earnings of companies. But large players like Sasol,
which has a strong cash position and diversified business, are expected to ride out the downturn. Sasol has
invested heavily overseas, most notably in Qatar where it operates the Oryx GTL facility, and, it is able to
leverage its proprietary technology that can be applied to produce fuels from coal and gas.

Executive Summary ....5
SWOT Analysis.6
South Africa Petrochemicals Industry SWOT ........ 6
South Africa Political SWOT 6
South Africa Economic SWOT ......... 7
South Africa Business Environment SWOT. 7
Global Market Overview.........8
Global Ethylene Capacities .. 8
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) .......... 8
Polypropylene.......... 11
Quarterly Oil Products Price Outlook ...... 14
Table: Oil Product Price Assumptions, Q408-Q409 (US$/bbl).. 16
Table: Oil Product Price Forecasts, 2006-2013 (US$/bbl)........ 17
Africa Regional Overview....18
Table: Gas Reserves, Selected African Countries, 2008 (bcm) ... 18
Table: Oil Reserves, Selected African Countries, 2008 (bcm) .... 18
Table: Cracker Capacity, Selected African Countries, 2007-2012 (‘000 tpa)... 21
South Africa Market Overview ........22
Market Structure...... 22
Table: South Africa’s Cracker Capacity, 2008-2013 ...... 22
Petrochemicals Business Environment....25
Table: Middle East And Africa Petrochemicals Business Environment Ratings .......... 25
Limits Of Potential Returns. 25
Risks To Realisation Of Returns .... 26
Industry Trends And Developments .........27
Sasol .. 27
Other.. 28
Upstream Developments ..... 28
Alternative Fuels...... 30
Industry Forecast Scenario ..31
Table: South Africa Chemicals And Petrochemicals Secto, 2006-2013 . 32
Macroeconomic Outlook..... 33
Table: South Africa – Economic Activity, 2005-2013 ..... 34
Company Monitor......35
Sasol .. 35
Dow South Africa..... 38
AECI.. 39
Shell ... 40
Air Liquide.... 41
Country Snapshot: South Africa Demographic Data ....42
Section 1: Population.......... 42
Table: Demographic Indicators, 2005-2030........ 42
Table: Rural/Urban Breakdown, 2005-2030 ....... 43
Section 2: Education And Healthcare....... 43
Table: Education, 2002-2005 ........ 43
Table: Vital Statistics, 2005-2030.. 43
Section 3: Labour Market And Spending Power .. 44
Table: Employment Indicators, 2001-2006.......... 44
Table: Consumer Expenditure, 2000-2012 (US$) 44
Table: Average Annual Wages, 2000-2012.......... 45
BMI Forecast Modelling.......46
How We Generate Our Industry Forecasts .......... 46
Petrochemicals Industry ..... 46
Cross Checks 47