Energy and chemicals group Sasol estimates that it will need to invest R11.7-billion at the Natref refinery JV and at Sasol Synfuels, in Secunda, to comply with the South African government’s Clean Fuels 2 (CF2) specifications.

The Natref crude oil refinery, in the Free State, is a JV with Total.

The specifications, which were published in the Government Gazette in June 2012, are aligned with Euro V emission standards and will be introduced from July 2017.

The South African Petroleum Industry Association has estimated that an investment of R40-billion will be required for South Africa’s refineries to comply with the CF2 specifications.

Writing in an update to shareholders on Friday, Sasol CFO Christine Ramon said the capital expenditure would be required to comply with the core specifications, octane and volume recovery. She added that the estimates were subject to change, based on the   finalisation of feasibility studies.

In April, energy groups BP and Shell confirmed a multibillion-rand programme to upgrade the Sapref refinery, in Durban, to meet the CF2 requirements, which stipulated a reduction in sulphur, benzene and aromatics levels in the petrol and diesel produced.

The announcement was made despite there being no finality on the cost-recovery mechanism from the National Treasury.

Ramon said that Sasol was encouraged by Finance Minister Pravin Gordhan’s February Budget announcement, indicating that support mechanisms would be introduced to assist the local refineries with the introduction of environmentally friendly fuels.

Details of these mechanisms are expected by the end of June.

“We   continue to engage with the National Treasury and the Department of Energy on cost-recovery mechanisms and specifications to be prepared and published by the South African Bureau of Standards,” Ramon said.

In her update, Ramon also reported that production from Sasol Synfuels was expected to come in at the “top end of the previously guided range of 7.2- to 7.4-million tons for the full year”.

“We remain confident that, based on the production guidance and our macroeconomic assumptions, we will deliver solid operational performance and earnings for the 2013 financial year compared to the reported attributable earnings of R23.6-billion in the 2012 financial year, excluding major once-off items such as the impact resulting from the Arya Sasol Polymer Company (ASPC) disposal,” she said.

She said the divestiture of ASPC, of Iran, was progressing, but at a slower pace than initially anticipated.

Sasol’s financial year will end on June 30, 2013, and financial results will be announced on September 9.