Based on various economic forecasters, the African continent had a total GDP of some US $800bn in 2005. There is a large variance between the largest economy South Africa (US $210bn GDP) and the poorest country in the world, Lesotho (US $1bn). This extreme is also reflected in the size of the industrial gases business across the continent. Industry analysts believe that the total industrial gases business reached US $980m in value in 2005 but has grown by an estimated 15% in 2006.
The largest market and the most industrially advanced
remains South Africa, which accounts for about 40% of the total market. There are a few other countries with notable gas markets - these include Egypt and Nigeria. The rest fall within the band of $3m to $50m markets in size.
The most significant change during 2006 is that the Linde Group has acquired the No.1 position in Africa following the completion of the BOC deal in September last year. This has not really changed the structure as Linde has increased its presence by merging its businesses in Northern Africa with that of BOC (south of the Sahara) but we understand the North African business is managed out of Europe still.
What is noticeable from our interviews with certain companies across the Continent and that with Allan Copper of Air Products, is that there is certainly a shortage of utilities (mainly power) which restricts the ability to increase production of gases and there is also a common message that there is a shortage of some gases in the region or the infrastructure to supply gases to certain markets is under-developed. This particularly applies to CO2, argon and helium. Interestingly, there is also a shortage of ISO tanks to use for liquid argon movements throughout the continent.
Experts believe that this is a temporary problem and that the industry will correct the imbalance that exists in the next year but we again provide more insight by dividing Africa into four main regions.
The interview with Allan Cooper provides a lot of insight into what was happening in the South African market, especially from an Air Products perspective. The region includes South Africa, Mozambique,
Namibia, Angola, Zambia, Zimbabwe and Botswana and the gases business is estimated to be US$575m in value in 2005.
Afrox (Linde acquired the 56% BOC stake in the company) is the largest gases company in the region and released its annual financial results for the year ended 31 September 2006. The company announced that the industrial business in South Africa grew by 21% in 2006, over 2005 despite a number of supply problems restricting some growth.
The company completed the total divestment of its Afrox Healthcare (hospital) business when it sold its entire stake in Life Healthcare Holdings to a black investor consortium for R850m on 29th September (2006). As a result, Afrox has become entirely focused on the industrial gases business in Southern Africa. It has used part of those proceeds from the healthcare sale to invest in new production capacity - including an upgrade to its ASU supplying SCAW metals in Gauteng, new liquid capacity will be brought on-stream in
Petermaritsberg (Zwa Zulu Natal), a new CO2 plant at Sasolburg and expects to start up new ASUs at Richards Bay and Extrata in Q1 of 2007
Both Afrox and Air Liquide have experienced supply problems of some gases in the region, mainly in South Africa. There has been shortage of CO2 in the region and beyond (Malawi) and argon remains very tight. Mid 2006 saw a tightening of supply of helium due to the slow start-up of new capacity in Algeria and Qatar.
Afrox announced that it had been awarded a State tender for supplies to hospitals and also won a homecare tender also associated with the State (Bidders to State run tenders have to demonstrate a Black Empowerment policy). LPG continued its buoyant growth trend but the full opportunities were not realised due to supply shortages from refineries.
Elsewhere in Southern Africa, there is a lot of off-shore activity in Angola related to the oil & gas industry and exploration. Argon is being exported from South Africa but the tight supply has led to some service companies looking for other sources of argon from Europe. Afrox has opened a branch in Angola but is yet to move into direct production.
We gathered in the Air Products interview that there had been a lot of activity in the Copper Belt area in Zambia and that Air Products is likely to have 5 ASUs up and running by the end of 2007. We are not aware of any other activity in the Zambian market.
Mozambique continues to be a small market but Afrox has consolidated its position in the country but the largest player is MOGAS - the independent gas company owned by a Portuguese family. MOGAS is apparently supplied by Air Liquide with the gases it can not produce itself.
Stretching along the southern coastline of the Mediterranean, the four main countries contributing most to the demand for industrial gases include Morocco, Algeria, Libya and Egypt. Egypt is by far the largest industrial gas market and has a reasonably developed steel and petrochemicals industry. The Northern African market is valued at approximately $220m in 2005, Egypt accounts for approximately 40% of the total.
Air Liquide is the major gas company in Egypt and has expanded its business in the country in 2006. The Industrial Gases Co. (UEG Group) is also active in the country and plans to invest in new production capacity and distribution fleet in 2007.
Algeria, has a relatively small industrial gas market but has become an increasingly important source of Helium to the global market. The new Helium facility in Skikda has not been fully commissioned and is one reason why there is a tight supply in the global market. The plant was due on-stream in late 2005 but has had a few teething problems in 2006. When fully on-stream its capacity will still be affected by the reduced LNG output until 2009. However, Helison (jv between Linde and Sonatrach) expect the plant to be fully operational in March of this year. Linde has also entered the Algerian gases business with an on-site facility.
Libya is still relatively under-developed from a gases perspective but new projects and construction activity is certainly boosting demand in the country.
Morocco is dominated by two gas companies - Air Liquide, the largest, and a privately owned gas company Maghreb Oxygene which has a 45% market share. There were no significant projects that were undertaken by the company in 2006. This market is medium sized for Africa (c $45m in value).
The Eastern Region of Africa is one of the least industrialised in the continent but has had a small but interesting gas business that has been the main domain of BOC over the years. The region includes Tanzania, Kenya, Uganda, the Horn of African countries, Chad and Sudan plus Indian Ocean countries/islands.
The size of the industrial gases business is estimated to be about $60m with Sudan and Kenya being the most notable markets.
BOC has the most significant presence in the region, mainly being active in Kenya, Uganda and Tanzania. In Kenya, BOC reported sales increasing to $15m in 2006 and the offer to acquire Carbacid (made in late 2005), the locally owned carbon dioxide supplier, is still ongoing and may well be completed in 2007. BOC has also recently re-entered the Ugandan market (supplied from Kenya). In 2006, BOC opened up a cylinder distribution facility in Dar es Salaam.
Here the company competes head on with TOL - its former operations in the country which were nationalised 15-20 years ago but has since been privatised.
TOL is now 55% owned by SAAMI Holdings (a fund for Tanzanian nationals). TOL recently commissioned a new CO2 plant (Union) and is supplying companies in Malawi and Zambia. In both November 2006 and January 2007, gasworld has reported that there was a shortage of CO2 for the bottlers in Malawi.
The West African region covers the largest number of countries (23 in total) with an estimated industrial gases market sized at $135m in 2005. The largest market is Nigeria, accounting for half the regional total. Demand has been increasing rapidly - driven by oil and gas exploration and also the mining industry.
Both BOC and Air Liquide are active in Nigeria - Air Liquide being the largest company. BOC posted $9m turnover in 2005. There are approximately 10 independent companies operating in the Nigerian market. One of the largest independent companies is Universal Gases Ltd which operates 2 ASUs and an acetylene unit.
A major GTL project is now underway by Chevron Texaco, requiring 7,000 tpd of oxygen. Air Products UK won the order to supply two large ASUs in 2004 and although the project has suffered delays we believe that it is now progressing.
While the markets elsewhere are relatively small, Air Liquide has a strong presence in the Western Region and is mainly due to its former French owned territories. The company operates several gas companies in the region and has focused its efforts in supporting the oil & gas exploration - the main driver for growth throughout the region. The company has built a liquid Helium transfill facility in Gabon to support the off-shore diving requirements.
The region suffers from some lack of product which needs to be imported. For example liquid argon is imported from Europe due to shortage of production capacity and purity. Several countries would produce more gases if the power infrastructure was improved. Several of the oil & gas offshore companies operating in the region actually ship their own gases into the region - especially diving gas mixtures and also welding gas mixtures.