Frost: ACS Suppliers Share Rising Fortunes of Sub-Saharan African Oil, Gas Sector

March 12, 2008 // Published as a news service by IHS

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Major oil- and gas-consuming countries are increasingly turning to sub-Saharan Africa for these commodities, according to Frost & Sullivan.

To help meet this surge in demand, fuel companies operating in the region are progressively investing in automation and control solutions (ACS) technologies.

Recent analysis from Frost & Sullivan of ACS in key sub-Saharan African oil and gas sectors found there will be several challenges expected to play a significant role in relationship with the ACS market.

"Oil and gas plants see ACS as a tool for achieving productivity and efficiency goals, as well as reducing the total marginal variable costs of their refineries in the long term," said Frost & Sullivan senior research analyst Jeannot Boussougouth.

Apart from benefiting from end-users' cost reduction drive, ACS suppliers will be encouraged by the fact that the majority of oil and gas plants use mature technologies. Analysts said this will increase the number of orders for retrofit, as was the case in 2007, when 55.0% of automation technologies were used for retrofit applications.

This trend is also the reason that 50% of oil and gas companies prefer distributors for acquiring ACS products, analysts said.

While ACS companies score high on reliability and quality (evidenced by 85% percent of respondents willing to give repeat orders to their current ACS providers), there is growing dissatisfaction with ACS providers' services. Although quality, reliability, price competitiveness and customer service are the most important purchase factors today, analysts said customer service is soon expected to ascend to the top of the list.

"Therefore, ACS providers that successfully differentiate themselves through superior service offerings, such as increased number of visits, improved technical support, training and on-time delivery of products, are likely to experience significant growth," said Boussougouth.

End-users' lack of technical expertise is also affecting their ability to supply fuel consistently, analysts said. This issue is compounded by the problems arising from years of under-investment in facilities, such as storage and transport for fuel off-loading.

Analysts said these fuel supply issues could benefit ACS companies, since oil and gas companies may turn to them to revamp their existing refining infrastructure and ensure smoother supply.

ACS suppliers will gain another significant boost from stringent environmental regulations that require oil and gas companies to invest in state-of-the-art refining assets, analysts said. End-users will rely on ACS to help them improve energy efficiency and comply with new clean fuels specifications regarding sulfur content in oil and gas.

"This development is expected to drive the widespread adoption of distributed control systems (DCS) in the next two to three years," said Boussougouth. "As a result, process standardization is becoming increasingly important, as it helps manage operations more efficiently."

Source: Frost & Sullivan.