A full feasibility study into the proposed Project Mthombo crude oil refinery, in the Eastern Cape, will be launched following the signing of a two-year framework agreement (FA) between South Africa’s national oil company PetroSA and China’s petroleum and petrochemicals group Sinopec.

South Africa’s Industrial Development Corporation had also been officially integrated into the next phase of the project in an effort to consolidate the possible funding options.

The agreement, which was signed in Pretoria, followed on from the conclusion of a joint study agreement, through which teams from both companies interrogated the business case for a “global-scale” refinery earmarked from development at the Coega Industrial Development Zone.

The capacity of refinery to be studied was not disclosed, nor were the likely sources of the crude oil feedstock.

However, public-domain information indicated that the project would entail the construction of a 360 000 bl/d facility, with an associated price tag of around $11-billion. It is also widely believed that South Africa will seek to secure crude for the refinery from Angola.

The cost of the feasibility study itself was also not disclosed, but PetroSA spokesperson Thabo Mabaso indicated that it would be undertaken jointly be the two companies.

Besides the feasibility study, work to secure all other regulatory approvals, including environmental approvals, would also continue.

Should the feasibility study return positive results, Mabaso indicated that the next milestone would be the approval of the front-end engineering design. That decision could be made during the first half of 2014.

PetroSA chairperson Dr Benny Mokaba described the FA as an “important building block” in realising the development of Project Mthombo.

But Mokaba’s Sinopec counterpart, Fu Chengyu, stressed that it would push ahead with the project “as long as it is economically and technically feasible”.

The FA also opened up prospects for PetroSA and Sinopec to cooperate on other oil and gas exploration and development prospects in South Africa and its “surrounding countries”.

In addition, downstream opportunities would be explored, including the development and acquisition of storage and logistical infrastructure in Southern Africa.