Although tank storage has existed in Africa for decades, increased stability, a growing demand, booming populations and size-able discoveries of hydrocarbons have fueled its extensive recent growth. In fact a recent report from Deloitte (The Deloitte Guide to oil and gas in East Africa, 2013) stated that “more hydrocarbons have been discovered in East Africa in the last 2 years than anywhere else in the world.” The announcement this week that Oiltanking have signed a joint venture with Mining, Oil and Gas Services (MOGS) to construct a commercial crude oil storage and blending terminal in South Africa is the latest development in the ongoing competition for market share in this booming region. In an emerging market where profit margins are still relatively small, the bulk supplies offered at terminals hold the key to greater profitability. Extra storage capacity is critical to oil marketers in the region and the building of new terminals and storage facilities across the region highlight this.
The recently announced Oiltanking / MOGS facility which on completion will offer a total capacity of 13.2 million barrels at the Port of Saldanha Bay, 100km north of Cape Town on the Southern Atlantic coast, offers a strategic location close to tanker routes and major oil consuming markets. In engaging in a joint venture with a local organisation, Oiltanking are aiming to bring their expertise as the second largest independent tank storage provider for petroleum products, chemicals and gases worldwide in the world with the regional knowledge and contacts that MOGS and their partners can provide.
Partnering with locals organisations is identified by many as a key factor is successful expansion into new markets. In a recent interview with Tank Storage Forum, Craig Garbutt, Group Operations Manager, Horizon Terminals Limited, Emirates National Oil Company Limited (ENOC) and no stranger to developing new facilities in Africa stated that “Working in any part of the world, new or otherwise requires a strong understanding of the local market. You need a real insight into the factors that will influence the success of the development – the geography, the political environment and the economic requirements. As such it’s important to work with local partners – don’t go in by yourself but select locals who can help.”
Horizon Terminals (a wholly owned subsidiary of Emirates National Oil Company (ENOC)) are a company at the forefront of expanding into Africa with a recently opened facility in Tangier in Morocco. Developing a terminal in North Africa offers a number of opportunities; ideally located at the crossing of two major maritime routes, is well positioned to draw on business with Europe, and able to help address an historic shortage of storage facilities in the region. Despite security risks, most obvious during the hostage crisis at the Tigantourine gas facility near in Amenas, Algeria in January 2013, the North Africa market is rapidly growing and one with many more plans in the pipeline.
In addition to the North Africa region and South Africa another part of the continent that’s developing strongly is Djibouti. The location of Djibouti on the straits of Bab el Mandeb and the Red Sea offers an excellent strategic location to the global oil trade routes since it is on the crossroad of major shipping lanes (Mediterranean-Suez-Arabian Gulf). A growing country in itself but is also the main gateway to neighbouring Ethiopia which is undergoing a transformation from a reliance on biomass for fuel to one moving into increasingly LPG and other imported fuels as well as Somalia and Eritrea.
Whilst East Africa also offers some of the most developed facilities in the region, with Vitol Tank Terminals International (VTTI) and Kenya Pipeline Company (KPC) managing major facilities in Kenya, and operations also in Uganda, Madagascar, Tanzania and Mozambique.
Although Africa offers a host of opportunities for those looking to expand into the continent there are also a number of challenges not least in recruiting the right people to make the facility a success. Yasvin Buckhoreelall, also of Horizon Terminals (ENOC Group) and who has worked extensively across Africa: “With upcoming technologies, one of the big challenges of Africa is still about raising the level of competence in a consistent and homogenous manner. It has been seen that in many locations, local resources and talents are scarce and competence gaps are breached by resourcing expatriates. Expats can solve the technical issues but that brings with it, its own cultural and language challenges in most cases. Companies need to look for an ideal mix of resources for a homogenous blending and knowledge sharing to achieve good results on all fronts.”
With the industry becoming increasingly crowded and competitive a share of the growing African market for an oil tank storage can offer a host of opportunities to grow new revenue streams, find new resources, dominate a country market and in building new facilities create highly efficient and productive facilities. Whilst for governments across the continent, the development of the oil industry offers potential to provide a major stimulus to their economies. Without a doubt Africa is a region likely to shape the future of our industry for years to come.