Belgium has approved new quality controls set to suspend the export of cheap, low-quality motor fuels from its ports to West Africa, the government confirmed May 23, in a move that could shift trade flows to alternative supply hubs.New measures will bring export quality standards on motor fuel exports in line with the European domestic market, targeting diesel and gasoline with high sulfur and chemicals content that has traditionally been exported at discounted rates to Nigeria and other West African consumers.
Historically, fuels have been exported with a sulfur content as high as 1,500 ppm (parts per million), far exceeding European standards, while new measures will cap sulfur at 50ppm, benzene at 1% and manganese at 2 mg/liter. Implementation will take place three months after the publication of a Royal Decree signed this week, a representative for the Minister of Environment confirmed May 23.
The new measures mirror regulations imposed by the Netherlands last April, which made Antwerp a hotspot for low-quality gasoline exports to West Africa due to its less stringent controls. In a statement May 23, Belgian Minister of Environment Zakia Khattabi addressed the risk of “dirty fuel” exports having shifted from the Netherlands to Belgium, underscoring the health risks of high-sulfur products. “For far too long, toxic fuels have been departing from Belgium to destinations, including Africa. They cause extremely poor air quality in countries such as Ghana, Nigeria and Cameroon, and are even carcinogenic,” she said.
Meanwhile, low-quality gasoline imports from Northwest Europe remain the key source of motor fuel in West Africa in the absence of significant domestic production. According to S&P Global Commodities at Sea data, West Africa imported about 137,000 b/d of gasoline from Belgium in April, comprising 33% of imports for its primary motor fuel. The share has increased from 18% of West African imports in April 2023, the same month the Netherlands imposed its ban.
Trade flow shift
With the ban expected to end cheap gasoline exports to West Africa, markets have eyed new sources of discounted fuel that could increasingly come to the fore. Belgium’s Minister of Energy Minister Tinne Van der Straeten expressed hope that the move would halt the flow of harmful fuels to West African nations. “By combining our strengths and powers, we can put an end to the export of toxic fuels to third countries.” she said. “Since the relevant oil companies do not take this responsibility upon themselves, we are asking the administration to monitor the quality of the fuels being exported.” Meanwhile, traders expect WAF buyers to be unwilling to pay a premium for higher quality product, and have already been eyeing blending opportunities in the Mediterranean and the UK, where export controls remain less stringent.
Storage operators in Antwerp had reported a gorwing reluctance among WAF exporters to sign multi-year deals at the port, in anticipation of the new export controls and demand for cheap flows from alternative sources, while premiums for storage capacity in Belgium are now expected to evaporate. In recent months, one storage operator in Cyprus reported a large trader seeking vast quantities of gasoline capacity at the terminal, while gasoline traders have flagged Barcelona as another potential source of new flows. Beyond Europe, West Africa currently only sources small volumes of gasoline from other regions, taking small volumes of around 20,000 b/d from the Middle East. Russian gasoline exports could also take on new prominence, analysts have speculated, noting its recent waiver on a gasoline export ban implemented in March.
Eyes on Dangote, domestic specifications
Severed flows of cheap gasoline supplies from Northwest Europe will put a renewed focus on Nigeria’s new Dangote refinery, which has pledged to end West Africa’s dependence on imported fuel. As the 650,000 b/d refinery has ramped up its operations, its ownership has continued to promote ambitious timelines for its first gasoline supplies, which will eventually be sufficient to cover the domestic market. Speaking at the Africa CEO Forum Annual Summit in Kigali on May 17, refinery owner Aliko Dangote said Nigeria would have no need to import “a drop” of gasoline from June, while S&P Global Commodity Insights analysts maintained that the site’s first gasoline supplies were unlikely to arrive before the third quarter and steady state production should take place around 2027.
As traders await news of the start-up of the site’s motor spirit block and fluid catalytic converter, commissioning of the refiner’s gasoline-producing units promises to materially affect export prospects to West Africa. Changing fuel specifications in West Africa could also permanently transform the region’s diesel and gasoline markets, with the Economic Community of West African States targeting a dramatic reduction in the maximum sulfur allowance to 50 ppm for the products by January 2025. In preparation for the transition, Nigerian gasoline imports have already been subject to sulfur caps of 150 ppm, down from 1,500 ppm in recent years, while domestic supplies continue to be permitted at higher levels.
The Nigerian regulator, the Nigerian Midstream and Downstream Petroleum Regulatory Authority was not available to comment on planned specification changes ahead of the ECOWAS target. “According to the NMDPRA, the goal is to gradually reduce the sulfur content of imported fuel. So it is still giving a pass to local refineries with a 650 ppm sulfur in their product until January when the ECOWAS agreement kicks in,” said Oluseyi Awojulugbe, senior analyst at SBM Intelligence.
Chemicals length
New chemicals limits on Belgian gasoline exports could also add length to the benzene market, which has applications for plastics, detergents and other use cases. Strong extraction economics for benzene had already reduced the blending of pyrolysis gasoline, or pygas, which contains benzene, into the gasoline pool, meaning the short-term impact on availability is unlikely to be noticeable. “The current benzene-naphtha spread is healthy, meaning everyone in extraction is running at full capacity,” one trader said, noting a pivot in recent pygas use. Meanwhile, the ban could add longer-term length to the market if benzene demand declines. “If you are limited [in] benzene in gasoline loaded out of Belgium ports […] that might make it much more difficult to use pygas in gasoline bending, making more pygas available for benzene extraction and increasing supply,” the trader said.
Source: spglobal.com