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Join James Gooder and George Maher-Bonnett as they discuss key market changes, refinery developments, regional hub pricing, the uptake of Argus Ebob and Argus' transparency initiative.
How has the West African oil market changed after deregulation?
What is the impact of Dangote and other upcoming refining projects?
Is West Africa becoming a pricing hub for refined products?
How is Argus answering the need for all-day price transparency?
Going to OTL Expo 2025? Come and meet the Argus team at booth S9.
Listen now
Transcript
James: Hello and welcome to another edition of Argus Media's "Driving Discussions" podcast, a regular broadcast bringing you up to date with some of the key events in fuels markets around the world. My name is James Gooder. I'm a VP for crude and African markets at Argus and have been for many years and I'm very pleased to be joined today by our senior reporter of oil products and specialist on Africa as well, George Mayer Bonnet. Hi, George. How's it going?
George: Hi, James. Thanks for having me today.
James: It's a pleasure. We are going to West Africa next week, you and I and a team from Argus, to attend the Offshore Trading and Logistics Conference in Lagos, the OTL Conference. This is a pretty long-running event and we've been attending for many years. So this podcast is really kind of a curtain raiser on some of the issues that we expect to hear about at that conference and also a little update on some of the changes that we've seen in the West African fuels markets, particularly on gasoline but not only, over the past couple of years. It's been a very tumultuous time. It always is down there, but it's been particularly unusually accelerated change going on with deregulation. First of all, of the Nigerian market, which of course is the largest fuels market in the region, the startup and ramp up and real impact of the large Dangote Refinery, which I know you can give us some details on, George.
And all of that means that rather than just being a kind of price-taking region with a huge short of gasoline in particular being filled by European exporters and traders, it's become a more competitive market and competition brings transparency eventually. And that's what we're starting to see emerge. And also, of course, gratifyingly for us at Argus, we've seen the uptake of the Argus EBOB gasoline pricing index as that market has become ever more connected to international norms. And we've got some news about what we're doing to bring even more transparency to that benchmark and how that will support development in the region. But George, over to you, what do you think are some of the key market issues that are kind of prevailing in the West African fuel market at the moment?
George: Yeah, thanks, James. So as you say, Dangote, well, has been broadly regarded as somewhat of a panacea when it comes to everything downstream, in both the national, I suppose, downstream industry in Nigeria, but also more broadly having a positive impact in terms of self-sufficiency for the West African region that surrounds it, of course. But I suppose what has become more apparent as the months have gone on since, you know, of course, the refinery ramped up in early 2024 is that other local players are somewhat sidelined by, I suppose, the sheer size and the gravitas that Dangote Refinery kind of claims with its position in the market. So what we're seeing now increasingly is a demand amongst independent trading houses outside of Dangote's orbit to have better, kind of, visibility on pricing, essentially, in order to better, I suppose, access the market in order to import when arbitrage allows it or export product, you know, which has landed on their lap, essentially. So that has been something that's alluded to them to this day, regardless of how, I suppose, disruptive and beneficial the Dangote Refinery has been in order to supply local consumers. Yeah, this is an aspect that still needs to be addressed, I suppose. Yeah.
James: Yeah, I mean, it's really...as you say, it's shaken up the whole market. I mean, this is the biggest refinery anywhere in Africa or Europe. And suddenly appearing in the markets, I mean, it was a long lead in, but the impact has been huge, as you say, both in terms of supplying the regional markets and the broader market. I mean, we've seen gasoline going from Dangote as far as the United States, we've seen jet fuel coming to Europe on a regular basis and diesel going out as well. So it's really kind of shaken up the market, hasn't it? But, I mean, maybe give a bit more of a sense of how this region is becoming a hub rather than just a kind of price taking sink for finished product, if you like. I mean, it's not just Dangote, there's other refining projects coming along and also some kind of emerging transparency that has allowed you and the team here to be able to put real market-based indexes on some of those local or regional trading products, markets.
George: Yeah, you're absolutely right. So, you know, we've touched here just briefly on the idea that, you know, West Africa is now better positioned in order to, you know, independently supply itself with, you know, greater volume of refined products, thanks to the Dangote Refinery. And of course, other regional refineries are being commissioned or restored in the cases of Angola and Ghana, respectively, this year. And again, that's only underscoring the importance of this region as it kind of seeks out its own pricing indexes. Yeah. The introduction of this, kind of, greater refining capacity in the region means that essentially West Africa is importing lower volumes of refined products, as in fact, making the region a net exporter in certain products, you know, most notably jet since early last year, April 2024. I suppose, therefore, it's developing into its own distinct market. So it's no longer a price taker from other continents, which has often been the case for Europe. And I suppose the time is now to reflect this new pricing environment. And yeah, I think the market demands that there are essentially new pricing assessments which reflects the unique dynamism of supply and demand fundamentals in West Africa.
So kind of speaking to this, you know, we've now had an established 50 PPM Nigerian spec gas oil cargo assessment on a FOB offshore Lome STS basis for the best part of a year now. So this has been established, you know, it's well received among stakeholders, and it shines a light on the flow of Nigerian spec gas oil to and from the region's most populous country. And looking beyond that, while we're also currently lining up a jet A1 cargo assessment on the same FOB offshore Lome basis, we're also about to launch an intraday benchmark gasoline assessment, which would see the most recent indication for the Eurobob Oxy Swap, non-Oxy and Oxy barges and their differentials against the underlying swap at four points during the trading session. So this is a solution we've been mulling over and discussing with these very stakeholders, which I've mentioned at the start of this podcast, those who have not felt that the access to, you know, decent pricing information has been there for them in the wake of Dangote starting up. They're obviously looking for better access to intraday pricing in order to better understand trigger pricing offers, I suppose, from from external supplies of gasoline into the region. So this is one other thing that we're working towards launching before the end of this month, actually, James, yeah.
James: Yeah, yeah, this is very current, isn't it? I might ask you for a bit more detail on that in just a moment. I mean, the interesting thing is that this market has developed into something very similar to what we see in other markets. I mean, as you know, I've been covering crude oil for a long time. And crude generally tends to trade with one common benchmark. And then each region, each grade, each type, each location has its own differential to that underlying benchmark. In the case of crude, it might be Brent or WTI. And in the case of products, if we're talking about gasoline in the Atlantic basin, it's the Argus EBOB price. And if it's middle distillates like jet and diesel we're talking about, then it tends to be the ICE gas oil futures price. And that, as I understand it, is kind of...the gas oil futures price is the basis for your assessment of that Nigerian spec 50 PPM gas oil. So you have not only the liquidity and the kind of market trust, if you like, of a very well-established benchmark, but you also have a trade-based local index that adjusts that price for those kind of specific needs.
And then, as you say, coming to EBOB, I mean, gasoline is the kind of big short in the region or has been. And as you were alluding to, there are different ways that it is traded. It used to be just a kind of delivered price that was passed from the trader or the major or the supplier along to the importer. And ultimately, either that price was subsidized and, therefore, the end consumer didn't see at all. But since deregulation in Nigeria, we have seen those prices passed along right down the supply chain. And nowadays, because Angota is using the EBOB price for selling much of its gasoline, importers are competing with that same benchmark. And so it's becoming more plugged into that. And it's an all-day price. It's based on trade throughout the day in that very liquid barge market in Amsterdam, Rotterdam. And as you were saying, we're planning to give some intraday timestamps to help people understand what the price is on the screen at a given moment, that when it comes to trigger pricing, they'll be able to understand exactly what it is they're being offered. So maybe you could tell us a little bit more about what those timestamps will represent and when they will come during the day so that subscribers, people looking at the markets and trading in that market will understand, you know, the most current possible levels.
George: Yeah, sure thing. So as you say there, James, we will have four timestamps. So these will be four points during the trading day from essentially the open around 9 a.m., slightly before we make our assessment at 5:30. And we'll be taking essentially not the last traded value for the E10 or E5 barges, we'll be taking the latest bid and offer level and matching that against the underlying Eurobob Oxy Swap to be essentially resulting in an implied value for that timestamp. And we would be repeating that throughout the day to give you essentially the latest implied value based on the most competitive bid and offer given for that gasoline barge grade at the given time, as well as that, again, key element, the underlying Eurobob Oxy Swap, which eludes many in the market. It's a piece of information which is not widely accessible. So I suppose that's our attempt at plugging the gap for now at intraday pricing, obviously with, you know, the ambition of broadening that access to more market participants.
James: Absolutely. Yeah. And ultimately, you know, we'd like to be able to share a kind of real-time view of that EBOB swap number throughout the day in order that you have total transparency and people will understand what the price is at any given moment. We're not quite there yet, but this is a step in that direction, right?
George: Yeah.
James: Well, I mean, thanks for all of that, George. It certainly sounds like we've got some exciting things coming down the track. And our ultimate goal, as I'm sure listeners to this podcast will know, is to kind of create a level playing field for trade so that buyers and sellers have access to the same information and they can negotiate in good faith and with the same set of assumptions, the same access to the same kind of key benchmarks. And that's what we're trying to expand into, particularly this very dynamic West African region.
So thanks, everybody, for listening. We will be, as I said, at the OTL Conference. It starts in Lagos, Nigeria on the 27th of this month, of October, next week. And if anyone is in Lagos and at that conference, please do seek us out. We'll be there with the big August team with a stand, sharing our insights and making contacts in that market. If you have any feedback on this or any other of our podcasts and broadcasts, please do give us a shout. And if you want access to some of the things that we've discussed, they can all be found in the August European Products Report, of which George is a proud exemplar. And we also have, of course, the August West African Oil Report in which certain specific prices for that region can be found. So thanks very much again, George, for joining us. And thanks, everyone.
George: Thanks.
James: You're welcome. It's great to see you. And thanks, everyone, for listening. And hopefully see you in Lagos. And if not, see you somewhere else.
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