Sep 07, 2012
SA will need extra oil refining capacity in future – SapiaBack
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He points out that the country continues to lead in terms of servicing neighbouring countries’ fuel needs and in moving towards introducing Clean Fuels 2 specifications by 2017.
However, in the near future, oil refiners and government will have to make the decision to increase local refining capacity, either through upgrades or expansions to existing refineries, or through the building of new refineries, he states.
Tshifularo believes that investment in the expansion and upgrade of the existing refineries, as well as in the building of a new refinery, is necessary, as the expansion poten- tial for the existing refineries is limited.
With its current refining capacity, South Africa is unable to produce sufficient fuel to meet local demand, which forces the country to import refined product, he says.
National oil company PetroSA agrees that demand for refined fuels in South Africa already exceeds supply and it expects the increase in demand to continue. Diesel consumption is expected to increase by 4.5% a year and petrol consumption by 1% a year between now and 2020.
Tshifularo says the investment by local refineries to meet the Cleaner Fuels 2 specifications will not change this, as the country continues to import refined product.
PetroSA states that South Africa will have to import 180 000 bbl/d of petrol and diesel if no significant investment is made in local refining capacity.
Sapia points out that planning is under way for several new refineries to be built in Africa, which will improve the continent’s overall refining capacity.
The proposed projects include PetroSA’s 360 000 bl/d Mthombo refinery; the 50 000 bl/d Port-Gentil oil refinery, in Gabon; Angolan State-owned oil firm Sonangol’s 200 000 bl/d Lobito oil refinery; as well as other projects in Nigeria, Côte d’Ivoire, Chad, Mozambique and Zimbabwe.
Meanwhile, Tshifularo notes that one of the challenges to increasing local refining capacity is that refiners will require an increased amount of crude feedstock. This, in turn, will increase the risk of exposure to disruptions in the global crude oil feedstock market.
The recent European Union- (EU-) and US-led trade sanctions against Iran on the export of its crude oil are an example of disruption in supply.
Meanwhile, by increasing fuel production capacity, local refineries will also increase their output of petroleum by-products, such as bitumen, which is used in road construction and which is often in short supply in South Africa.
Tshifularo notes that oil refinery upgrades and expansions will also create revenue for the refineries and possibly create short-term employment during construction and long-term employment as a result of the additional capacity.
He believes, however, that South Africa can rule out the construction of new coal-to-liquids (CTL) and gas-to-liquids (GTL) plants in the near future.
Petrochemicals group Sasol in 2010 put its proposed 80 000 bl/d Project Mafutha CTL project in South Africa’s Limpopo province on hold, while it sought a commercially viable carbon capture and storage (CCS) solution.
Further, there is no talk of the expansion of PetroSA’s GTL plant in Mossel Bay, owing to gas feedstock concerns that could affect the sustainability of the refinery.
As a result, Tshifularo states, all fingers point to the possible establishment of PetroSA’s Mthombo refinery.
Transnet Pipelines’ R23.4-billion NMPP, which replaces the existing and ageing Durban–Johannesburg fuel pipeline to transport petrol, diesel and jet fuel from Durban to Gauteng, will be fully opera- tional by December 31, 2013.
“The new pipeline will change the way people do business once it has been fully commissioned, as it will ensure the inland demand for fuel is met and road congestion is eased by reducing the number of fuel tankers on the roads,” says Tshifularo.
Meanwhile, the country’s response to air-quality regulations, such as the lowering of carbon dioxide (CO2) and other greenhouse-gas emissions, in line with minimum emission requirements, will require significant investment by industries and may contribute to activity in the construction sector through the implementation of air-pollution control solutions.
The country’s move to implement Clean Fuels 2 specifications by 2017 will lead to significant investment over the next three to five years, states Tshifularo.
“Currently, investment in implementing the Clean Fuels 2 specifications by refineries is still quite uncertain, as it is not guaranteed that all refineries will invest in the upgrades. As a result, the successful implementation of Clean Fuels 2 is still strongly determined by government’s decision on possible financial assistance,” he explains.
The increased legislation for the liquid fuels sector – such as the minimum emission standards as outlined in the Air Quality Act; the Cleaner Fuels 2 specifications; and fuel manufacturing, and wholesale and retail regulations, which determine the retail and wholesale margins – has been challenging to maintain and implement, says Tshifularo.
He notes that issues which will continue to impact significantly on the petroleum industry in the next five to ten years are climate change, greenhouse-gas emissions mitigation, enter- prise and skills development, as well as attempts to further lower CO2 emissions.
“The push by the Clean Fuels 2 specifications to reduce the sulphur content in fuels from 500 parts per million (ppm) to 10 ppm will not come to an end after 2017. It will be followed by a move to tighten the fuel specifications further,” concludes Tshifularo.
Edited by: Chanel de Bruyn© Reuse this Comment Guidelines (150 word limit)
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