Author Argus

LPG was a hot topic at this year’s African Refiners and Distributors Association event, with new opportunities in the horizon.

This special episode of Global LPG Conversations comes from the sidelines of the event, with Argus’ David Appleton, VP LPG, and James Gooder, VP Crude, where they discuss trends for LPG in the African region, potential growth in the global market, along with the focus on ‘energy transition’ and biofuel production in the region.


Join the webinar: 2024 global LPG pricing review & forecast, on Tuesday 30th of April at 2 pm BST or watch on demand after the live event. Read the topics here.


David: Welcome back to "Global LPG Conversations," Argus' podcast in which we explore the hot topics around the world of LPG. My name is David Appleton. I'm the VP for LPG at Argus. And today I'm joined by my friend and colleague, James Gooder, our VP for Crude in Africa. Hello, James.

James: Hi, David. How's it going?

David: Yeah, good. And we are once again, as we were, I think roughly this time last year in for the Africa Refiners and Distributors Association Conference. And we did a podcast last year just to kind of review our impressions about what we were seeing in terms of discussions and the actions around growing LPG markets and actually wider energy markets as well. And so we thought it would be nice to kind of check in a year on and give a few more impressions from this, really what's probably the most important event that takes place in the downstream in Africa.

And I think last year, James, you noted that the energy transition means something quite different in Africa to, for example, Europe, where the focus is much more on renewables. And here, it's more about a combination of maybe locally clean fuels and then also actually energy access and energy security. And I'm wondering what's come through to you this year in terms of the debate and discussions.

: Yeah, you're absolutely right. When you're in the Global South or Africa in particular, energy transition, as we've noted before, is not about changing existing networks to more renewable ones. It's more about extending networks into hinterlands that often have no connectivity or very patchy connectivity. When electricity is as unreliable as it is on parts of this continent, it's not a question of switching away from one thing to another. It's more just how can we get this network into these areas.

And of course, a lot of African electricity is renewable anyway, and a lot of it comes from hydro and so on. That said, I have noticed a move on these topics this year. There's still a big focus on getting LPG, in particular, we can talk more about that, into more areas of Africa. And there's a big growth story and some bottlenecks that we can talk about. But also, for the first time, I am hearing more interest in things like biofuels, for example, which has been more of a kind of European/Asian topic, and America as well, of course.

But there is some scope for producing the feedstocks for biofuels in Africa, very fertile countries, and sending those feedstocks to Europe much closer, of course, than Malaysia and Indonesia and some of the traditional areas where those feedstocks are coming from. So there's interest in that. And also, a bit further down the line, we're starting to hear a discussion around some of the more kind of zero-carbon alternatives.

There's a project just north of where we are here in Cape Town, up in Namibia, that seems to be moving ahead where solar power is going to be used to split water molecules and create hydrogen and possibly also green ammonia for use in shipping and other applications. And that, if it were to happen, would be an interesting kind of jump ahead to what is all still quite experimental even in other parts of the world. So we're starting to hear those kinds of discussions.

But also in terms of clean fuels, that means something slightly different here as well. It's more about getting the sulfur down, getting the pollution down in cities rather than decarbonizing some of the transport and cooking fuels. I mean, I can talk a little bit about the transport fuels and you can come back on the LPG.

David: Yeah. 

James: But there are moves to stricter regulation on the sulfur content of fuels in the ECOWAS West African region. There are new rules coming in at the end of this year to restrict down to 50 parts per million the amount of sulfur in fuels. And that's quite a cut from where those levels have been at two, 300-plus in gasoline and so on. And also, of course, last year, this was purely theoretical, but now we have a large new refinery in West Africa, the Dangote Plant, which is, in theory, going to be producing low-sulfur fuels for those regional markets. One of the sad things down in here in South Africa from a refining perspective is how many of those have closed. And so this market's become more and more reliant on imports. And it's a big short. But anyway, there's a lot of change going on at different rates across the continent. It's hard to [crosstalk 00:05:24].

David: Sure. And then just before we move to the LPG discussion, just on the specifications on the lower sulfur, what does that mean for pricing in the region of these products?

James: Well, it's a good question, really, because the pricing in West Africa and in indeed South Africa, southern Africa, tends to be linked to benchmarks far away in Europe or the Middle East or even Singapore. And often those benchmarks are already for high-spec low-sulfur fuels. And the quality that traditionally has been imported here, lower octane, higher sulfur, poorer fuels basically blended in places like Rotterdam, Antwerp, and so on.

And so African importers and ultimately consumers have been paying a premium price for substandard products. That's starting to change. Within the past year again, since we last recorded this podcast, there have been some changes to the export rules from Belgium and Netherlands. Netherlands first, in fact, took the initiative to outlaw the export of dirtier fuels wherever they happen to be headed. And most of them were headed to West Africa. And that is already having an impact on the quality of fuels that is being imported into those markets. And the hope is that other places will gravitate to those better standards. And indeed, Dangote Plant should be producing 10 parts per million sulfur fuels too.

So I think we're about to see a kind of sea change in the quality, but probably not in pricing because those fuels were already...sorry, those substandard fuels were already being priced at higher quality prices. So I think we may start to see more competition with the Nigerian market having deregulated. That should bring more players to the table amongst the importers and that in turn should help to keep prices lower than they would otherwise have been.

David: Right. Understood. Yeah. Then just moving to the LPG, if I can just complement your discussions around liquid fuels, gasoline, and so on. And what's kind of struck me this year is firstly, the number of discussions that I have had with people from different countries about growth in the market. And there certainly has been growth over the past, say, 5 or 10 years, I think in almost every single African country. But there's been some plateauing that I think that we are observing over the past 18 or 24 months. And a lot of that comes down to a combination of a lack of financing for distribution models and for primary infrastructure and then, of course, the affordability of the product itself. And I think this is something that we will see a lot more focus on in the next few years.

Our previous podcast was a really good interview between with Matt Scotland, our LPG World editor and my friend and colleague from the World Liquid Gas Association, Michael Kelly, on a really big summit that the IEA is holding in Paris next month, which is looking at this issue of clean cooking and how to basically bring not just LPG, but LPG will be central to that, but more of those clean products to households in Africa.

And this topic has come up a number of occasions during the panel discussions. And I think we will see a lot more finance come from large institutions to back this up. There was an announcement also from Aadhaar itself in partnership with the Global LPG Partnership, who are looking at raising a large amount of money for basically big-ticket infrastructure and other parts of the supply chain.

And just to add, last week, I was actually in Mozambique for LPG Expo event. And you saw kind of the same thing there, where there's been strong and sustained growth over the past few years. But if it's going to carry on simply because of the distances involved, which in Africa are sometimes really, really long, I think it was quoted that there are often trucks are going, say, 1200 kilometers to deliver LPG, without the new primary infrastructure, new terminals, it's simply not affordable and not really realistic to physically deliver large amounts of product, those kinds of distances.

So, yeah, this is really a necessary part of the chain. I do see a focus in a lot of both the private sector and the operators and then also from finance institutions and governments to really recognize that they need to build out this infrastructure to keep that price, delivered price to these terminals from the global hubs reasonable going forward. So it's certainly something we'll be watching. I believe we'll see more and more of the total demand for LPG in this region continue to grow and hopefully catch up with other parts of the world. But yeah, it's been very interesting again I think. And yeah, we'll see how things progress as we go forward.

James: Absolutely. Lots of untapped demand for LPG in Africa. You can feel the kind of coiled spring. It's just a question of getting the infrastructure in.

David: Yeah, great. Okay. I think we'll wrap things up there. Thanks again, James. And I'm sure we'll have you back on for another episode or in other Argus podcasts where I'm sure your knowledge of crude oil and related markets is being dispensed out through the world through these podcasts and webinars.

James: You're too kind. Thanks for having me.

David: Thanks, James.