Project Mthombo, Coega industrial development zone, South Africa

29th March 2013

By: Sheila Barradas

Creamer Media Research Coordinator & Senior Deputy Editor

  

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Name and Location
Project Mthombo, Coega industrial development zone (IDZ), Eastern Cape, South Africa.

Client
PetroSA.

Project Description
South Africa's State-owned oil company PetroSA plans to build a 360 000 bl/d crude oil refinery, about 10 km from the Port of Ngqura, at Coega, near Port Elizabeth, in the Eastern Cape, to meet the growing demand for fuel in the country.

The facility is designed to refine crude oil from the Atlantic Ocean, known as heavy sour, as opposed to the light sweet crude oil from the Middle East, which South Africa’s existing refineries are designed to turn into petroleum products.

Once completed, the refinery will be the biggest in Africa and will reduce South Africa’s reliance on oil imports by supplementing the country’s growing diesel and petrol shortfall with cleaner fuels.

An electricity power plant is also planned as part of the project. It is envisaged that the power station will generate about 800 MW of electricity, of which 200 MW will be used for the refinery. The excess power will be fed back into the national grid.

Value
The project cost is estimated at $11-billion.

Duration
Commissioning is scheduled for 2018/20.

Latest Developments
A full feasibility study into the proposed Project Mthombo refinery was launched on March 26, following the signing of a two-year framework agreement (FA) between PetroSA and China’s petroleum and petrochemicals group Sinopec .

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

The agreement follows the conclusion of a joint study agreement, through which both companies’ teams interrogated the business case for a ‘global-scale’ refinery, earmarked for development at the Coega IDZ.

Neither the capacity of the refinery to be considered, nor the likely sources of the crude oil feedstock, have been disclosed.

The cost of the feasibility study itself has also not been disclosed, but PetroSA spokesperson Thabo Mabaso has indicated that the two companies will undertake it jointly.

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

Should the feasibility study indicate positive results, Mabaso has said that the next milestone will 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 has described the FA as an “important building block” in realising the development of Project Mthombo.

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

The FA has 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 will be explored, including the development and acquisition of storage and logistical infrastructure in Southern Africa.

Key Contracts and Suppliers
KBC Advanced Technologies (project technical/commercial adviser); HSBC (project finance advisory service provider); KBR (feasibility and Feed study services); Edward Nathan Sonnenbergs (ENS) consortium (legal advisers); the Council for Scientific and Industrial Research, or CSIR, (environmental-impact assessment); Fairbrother Geotechnical Engineering (geotechnical investigation) and Sinopec Engineering (review, selection and development of a business case).

On Budget and on Time?
Too early to state.

Contact Details for Project Information
CSIR, tel +27 12 841 2911, fax +27 12 349 1153 or email callcentre@csir.co.za.
ENS, tel +27 21 410 2500, fax +27 21 410 2555 or email info@ens.co.za.
Fairbrother Geotechnical Engineering, tel +27 21 715 5470 or fax +27 21 715 6369.
HSBC, tel +27 21 405 6500 or fax +27 21 424 8745.
KBR investor relations director Rob Kukla, tel +1 713 753 5082, fax +1 713 753 5353 or email investors@kbr.com.
PetroSA spokesperson Thabo Mabaso, tel +27 21 929 3000, fax +27 21 929 9294 or email thabo.mabaso@petrosa.co.za; or midstream new ventures VP Joern Falbe, tel +27 21 929 3600.
Sinopec, tel +86 10 6916 6396, fax +86 10 6916 6645 or email guxb@sinopec.com.

Edited by Creamer Media Reporter

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