The African Continent is vast and, apart from a few specific countries, has little in the way of a developed industry. As a result, Africa has one of the
smallest merchant industrial gas markets of all the regions in the world and yet there is a fast developing market from this small base, which amounted to over $800 million in 2004. As part of its annual coverage of the industrial gases markets, gasworld presents this Special Feature on the recent news, announcements and investments that have taken place in the region.

The Market

According to industry analysts 1, the African region has a gas business valued at $825 million in 2004. The largest market and the most industrially advanced is that in South Africa which accounts for about half the total market. There are a few other countries with notable gas markets \\$quot;“ these include Egypt and Nigeria. The rest fall within the band of $3m to $40m markets in size. However, interestingly, a much larger amount of industrial gases are consumed by customer owned units and Africa houses the largest single consuming site for oxygen in the world, in South Africa, amounting to some 35 000 tpd of gaseous oxygen.

For historic reasons, the continent has two main companies which dominate the supply of industrial gases across the region \\$quot;“ Air Liquide and BOC. Generally their current presence in the Region is a reflection of the development of the French and British Colonies in the early 20th Century. There have been many changes in the structure of the gas supply side in the past 50 years, depending on the political status of the governments in various countries which have lead to several of their businesses being nationalised and then re-privatised. However, both companies remain the dominant force in the continent. Other companies, such as Air Products, Messer and Linde, have shown interest and even developed businesses in the Region over past 35 years. Linde and Messer had a joint venture in South Africa (Fedgas), which was fully acquired by Messer in the late 1980s and subsequently sold to Air Liquide in 2002 (Messer sold its entire businesses in Egypt and South Africa to Air Liquide).

However, there have been some recent developments in the market with new markets opening up (Mozambique, Madagascar, Western Africa), albeit small, which has allowed the international gas companies to expand their presence in the region. We address some of the regional developments below:

Southern Africa

South Africa dominates this region and the industrial gas business has been driven by the development of steel and petrochemicals over the years. Spiritus values the market at over $400m in 2004, which is dominated by Afrox, the stock market listed subsidiary of the BOC Group.

Afrox released its annual financial results for the year ended 30 September 2005 with the industrial business growing by 16 percent (includes international business). The company underwent a major re-structuring in 2005, when its parent company, the BOC Group, agreed to sell off most of its Afrox Healthcare (hospital) business in one of the largest Black Empowerment Enterprise (BEE) deals undertaken outside of the mining sector.

As a result, Afrox will become mainly focused on industrial gases and some funds (est. $75 million) from the sale of the Healthcare business will be re-invested in this business in several projects, which included the total re-engineering of the gases operations centre in Germiston . This centre is already the biggest integrated gas production, cylinder filling and distribution centre in the southern hemisphere. Afrox will also expand the capacity of their welding consumables factory in Brits and will be adding new products for both local and export customers.

In 2005, Afrox was again awarded the State contract for welding products and gases. In addition, for the first time, Afrox won the State home care contract, which includes oxygen-based and other respiratory therapies, home medical equipment, infusion services and medical gases.

Air Products also has a strong position in South Africa and is the No 2 gas company. The company is heavily weighted to the on-sites business \\$quot;“ with large on-site contracts with Mittal South Africa and Sasol in the Guateng State. The company launched its new mini-bulk service (Maxi-Tank) in 2005 and has become the largest small bulk distributor in the country. Earlier on in the year, the company announced that it had introduced JetBOxâ„¢ system (Process Technology International, Inc.\\$quot;s process) to the local steelmaking industries. This new technology allows steel makers to improve the efficiency of Electric Arc Furnaces (EAF) and, consequently, the performance of their entire steelmaking operation. The first introduction was made into Mittal, a customer of Air Products South Africa (Pty) Ltd.

Air Liquide is the No 3 gas company in South Africa following the acquisition of Fedgas in 2002, which was merged with its existing gases business. The company has spent the last 2 years consolidating this business. Air Liquide has a strong presence in the country as a supplier of large air separation plants and commissioned its 15th ASU at Sasol\\$quot;s coal to liquids facility in Secunda in 2004 \\$quot;“ with an estimated 35 000 tons per day production capacity. Air Liquide also has a growing business in Botswana, related to the non-ferrous metal business. Much of the business is on-site related.

Other countries that make up the Southern Africa zone includes Mozambique in which both Afrox and Air Products have recently entered to supply the small but growing market. Recently natural gas projects developed by Sasol have driven the need for industrial gases in the country.

Zambia continues to grow and BOC has built upon its \\$quot;re-entry\\$quot; into this market in the late 1990s in supplying industrial gases for both industry and the food processing markets. Air Products also has important on-site supply schemes in the Copper Belt in northern Zambia, and is currently commissioning its third ASU in the country. Another market opening up is Angola and while business conditions remain difficult, the developing oil and gas business is driving the demand for industrial gas supply in the country. Unfortunately, the economic and political climate in Zimbabwe has had a devastating impact on the industrial manufacturing base and hence the demand for industrial gases.

Northern Africa

Stretching along the southern coastline of the Mediterranean, the five main countries contributing most to the demand for industrial gases include Morocco, Algeria, Tunisia, 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 $170 million in which Egypt accounts for 45%.

Air Liquide has been consolidating on its position in Egypt following its acquisition of Messer Egypt (and various subsidiaries) in 2002. This market is a relatively difficult market, with a mix of State owned enterprises, producing their own gases (captive) but selling surplus on to the merchant market, competing with a number of privately owned gas companies which also operate in this market. The former State owned industrial gas company was acquired by a private trading consortium (Union Engineering) in 2000/1 following an attempt by the Egyptian Government to sell to major gas companies at a value twice that which was realistic for the assets which were very old.

Algeria, has a relatively small industrial gas market but has become an important source of Helium to the global market. The first Liquid Helium recovery and liquefaction facility (600 MMSCF) was built in 1993 at Arzew in Northern Algeria. This was built by Helios, a tri-venture between the State owned oil and natural gas company, Sonatrach, and Air Products and Air Liquide. A second unit (c. 650 MMSCF) is complete and is being built at Skikda by Linde Gas and Sonatrach. This plant is due to start up this month although this facility will only operate at 50% capacity until a new LNG facility is built following the explosion in 2004 which wiped out 50% LNG capacity at the site. Sonatrach are rumoured to be considering a third recovery unit although the global supply/demand for Helium is well satisfied at present with the start-up of another world scale facility in Qatar.

Libya has become a country of interest since the Government renounced its support of terrorism and UN sanctions were lifted. While the merchant market is relatively small \\$quot;“ there will no doubt be a number of interesting projects developed over the next 5-10 years related to oil and gas which will greatly boost the demand for industrial gases.

Morocco is dominated by two gas companies \\$quot;“ Air Liquide and a privately owned gas company Maghreb Oxygene. This market is medium sized for Africa (c $40 m in value).

Eastern Region

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. While the structure changed somewhat following nationalisation in Tanzania and divestment in Uganda in the late 1980s/early 1990s the region still attracts the interest of both private operators and BOC.

The market is, however, small and the largest is that in Kenya where BOC has had a long presence with a turnover of $14 m in FY2005. At the end of 2005, BOC had a bid accepted for the acquisition of Carbacid \\$quot;“ the locally owned carbon dioxide supplier for approximately $15m. The company has also recently re-entered the Ugandan market (supplied from Kenya) and after years of trying acquire back its former business in Tanzania (TOL) has entered the Tanzanian market directly. This is also supported by increased activity in Malawi. The Government is still considering privatisation of TOL but the company is lumbered with a large debt that has financially crippled the company over the past 5 years.

Western Region

The largest market in Western Africa is Nigeria, amounting to an estimated $65m in 2004. Demand has been increasing rapidly \\$quot;“ driven by oil and gas exploration of Western Africa and the mining industry. Clearly the region suffers from political instability but various countries like Gambia, Ivory Coast and Nigeria are increasing their need for gases.

Nigeria may see a major project requiring 7 000 tpd of oxygen related to the ChevronTexaco GTL project which has been announced in 2004. However, the project is slated for marshland which has itself major issues to overcome and as yet the project has not commenced. It is believed that if the project goes ahead the two 3 500 tpd ASU units will be owned by the operators of the GTL unit (captive).

Air Liquide has a strong presence in the region and is due to its former French owned territories. The company operates several gas companies in the western region and has focused its efforts in supporting the oil & gas exploration to extent that it has built a liquid Helium transfill facility in Gabon to support the off-shore diving requirements. BOC has a long traditional business in Nigeria, managed from its South African base.

According to Spiritus, the growth in demand for gases will grow strongly over the next 5 years across much of the continent, even if the size of the markets are small \\$quot;“ driven by the increased demand for metal smelting/processing and in oil & gas recovery and processing. The consultants expect that Africa will exceed $1.1 billion in value by 2009.

Interesting Fact:

Albert Spencer, General Secretary of the South African Compressed Gas Association read with interest about the world\\$quot;s largest vacuum insulated tank storey raised in November\\$quot;s Edition related to Woikoski in Finland and informed gasworld that the largest tanks were in fact built by Industrial Research & Development in South Africa. Three units were manufactured between 1977 and 1978 and each unit has a capacity of 460 tons of liquid nitrogen. The base volume of these tanks is 575 cubic metres and all three are still in service at various sites in South Africa (Afrox). gasworld welcomes such contributions on all aspects of the gas business.