The refined petroleum products business comprises of companies that convert crude oil into refined petroleum products such as petrol, naphtha, diesel, petroleum gas, etc. The value addition of these products is done in refineries as per the customers' demand in order to make them marketable. South Africa's refined petroleum products market is expected to witness a CAGR of more than 1.1% during 2020 - 2025. Major factors like strong economic growth, an increasing number of vehicle sales, the penetration of LPG, and the increasing population are expected to drive the demand for refined petroleum products. The surge in demand for petroleum products to manufacture petrochemicals is expected to propel the refined petroleum products market in the near future. However, the use of electric vehicles and increasing concerns on carbon emissions, generation, and management of hazardous waste from petroleum refineries are expected to restrain the refined petroleum products market during the forecast period.
- Automotive gas oil is expected to hold the largest share in the market, due to the heavy consumption in the automobile sector of the country.
- Transition to cleaner fuels is expected to provide an ample opportunity for LPG in the coming years. Rising electricity costs is likely to prove to be a major driver for domestic and commercial consumers switching to LPG in South Africa. Given the rising electricity costs, the unreliability of electricity supply, LPG becomes critical to the household energy in low-income communities. Thus, there is a growing demand for LPG as cooking fuel in homes, and particularly as a transport fuel in South Africa is likely to provide an opportunity in the market in the future.
Key Market Trends
Automotive Gas Oil to Dominate the Market
- The major petroleum products that are sold in South Africa are petrol, diesel, jet fuel, illuminating paraffin, fuel oil, bitumen, and liquefied petroleum gas (LPG). Among the consumed refined products, Automotive Gas Oil (AGO) or diesel is the major liquid fuel that is used in South Africa.
- Diesel production had witnessed decent growth in the country in the past few years. The demand for diesel surpassed the domestic supply during the observed period. In 2019, diesel imports have reached 5,858,025,643 litres whereas exports have reached a value of 1,785,976,432 litres. Thus Statistics show that domestic downstream refined product like diesel has seen a gradual shift from being a net export market to a net import market in the past few years.
- Most of the diesel consumed in the country was in the commercial sector, especially in Western Cape, Northern Cape, KwaZulu-Natal, and Gauteng. The commercial operators use diesel for stationary engines, such as small boilers and generators, as well as for heavy machinery for production purposes. Therefore, the increase in the diesel demand from the commercial sector was mainly driven by strong economic growth.
- Therefore, automotive gas oil is expected to hold a significant share in the market during the forecast period.
Increasing Demand for Petroleum Products to Drive the Market
- South Africa has the second-largest oil refining capacity in Africa. In 2018, the country had a total refining capacity of about 520000 barrels per day, of which approx. 70% is from crude oil refining, with the balance coming from synthetic fuel refining (CTL and GTL).
- South Africa mostly relies on imported crude oil and refined petroleum products to meet the country's demand. The country’s crude oil imports are mostly from OPEC countries. Over 60% of products refined locally are produced from imported crude oil, and about 38% of the demand is met by coal-to-liquid (CTL) synthetic fuels as well as gas-to-liquid (GTL) synthetic fuels and a very small amount of domestic crude oil.
- In 2018, the consumption of petroleum products in South Africa was petrol (11142 millions of liters), diesel (12539 millions of liters), paraffin (702 millions of liters), jet fuel (2346 millions of liters), fuel oil (552 millions of liters), and LPG (504 millions of liters).
- The future of petroleum products depends on factors such as demand growth, sustainable resources, and environmental constraints. The increase in demand for petroleum products is determined primarily by the growth in the country’s GDP, GDP per capita, the rate of urbanization and population growth.
- Therefore, the increasing demand for petroleum products in the region is expected to drive the market studied, during the forecast period.
South Africa refined petroleum products market is moderately fragmented. Some of the major key players in the market include Total SA, ENGEN PETROLEUM LTD, PetroSA, Royal Dutch Shell Plc, and Sasol Limited.
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