South Africa’s national oil company, PetroSA, would submit a recommendation to the Department of Energy this month requesting that it be allowed to retain a noncontrolling 37,5% equity position in a proposed new $10-billion, 400 000-bl/d crude oil refinery, opening the way for the 62,5% 
balance of the shares to be held by strategic equity partners.

The State-owned group had completed the technical feasibility study for the megaproject, which it was proposing for construction at the Coega industrial development zone, on the landside of the country’s newest deep-water harbour, the Port of Ngqura, in the Eastern Cape.

CEO Sipho Mkhize said that various ownership scenarios had been interrogated and were still possible, but that PetroSA believed that its recommended model would be the most palatable to prospective partners.

The model would also make it more affordable for both PetroSA and its share-
holder, the South African government, particularly in the context of increasing competition for scarce budgetary resources. 
This competition was expected to intensify further as the national fiscal balance descended 
deeper into deficit, with economists warning of a 6% to 8% deficit in 2010, on the back of falling revenue collections.

Mkhize indicated that there had already been significant interest in the project from companies “in the East”, but that Cabinet would need to decide whether or not it 
wanted South African control over the facility.

A Cabinet decision on the preferred shareholding mix was expected before the end of this calendar year and PetroSA would then seek to firm up partnership agreements and/or funding plans. 
It would also open the way for it to finalise the detailed refinery design during the first quarter of 2010.

The commissioning of the refinery was still being scheduled for 2015, but Mkhize acknowledged that these timelines could be placed under strain unless greater urgency was shown in progressing ancillary work, such as environmental-impact assessments at the port, as well as in finalising water and electricity connections. The plant would require 200 MW during construction and discussions were under way with Eskom to secure that requirement.

But, besides shareholding and financing arrangements, work was also advancing on plans to secure the necessary crude feedstocks for the facility.

The plant would probably be designed to convert so-called ‘heavy sour’ material, found predominantly in parts of the Middle East and South America, into diesel and petrol.

However, it was also possible that ‘sweeter’ 
crude from Angola could be blended into the final mix, with PetroSA hoping to 
secure supply contracts in tranches of 100 000 
barrels or more.

Wherever possible, PetroSA would also seek to conclude deals giving it ownership over the crude inputs, and the recent joint venture (JV) agreement with Venezuela’s PDVSA 
offered some indication as to the type of deal being pursued.

Earlier in October, PetroSA and PDVSA 
announced the creation of a JV to exploit a mature oilfield in the South American country. 
Some $400-million could be invested over four years to extract oil from the fields in the state of Anzoategui.

PetroSA planned to invest $10-million within the next six months to finalise the technical studies and, should the JV succeed, production of 30 000 bbl/d was possible within the next 24 months, Mkhize said.

Should Cabinet approve PetroSA’s ownership model by December, the group’s next move would be to finalise its front-end engineering design for the Coega refinery by March – setting out the technical design of the plant and the types of material it would process.

PetroSA would also seek to develop synergies between the Coega refinery and other maturer coastal refineries in South Africa, as well as with its own gas-to-liquids facility in Mossel Bay, where various life-extension options were being considered.

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