Energy Minister Dipuo Peters has indicated that work on the cost-recovery mechanism for the upgrade of South Africa’s oil refinery to the cleaner fuels 2 (CF2) specifications should be finalised by the end of June.
The specifications for petrol and diesel were published in the Government Gazette in June 2012 and are generally aligned with the Euro V emission standards.
It is anticipated that South Africa’s refineries will need to invest about R40-billion to meet the CF2 specifications, which will be introduced from July 2017.
In a response to a Parliamentary question, Peters indicated that all domestic refiners were prepared to meet the specifications and standards provided that a cost-recovery mechanism was in place.
She indicated that the Department of Energy and the National Treasury are considering using the fuel levy, but that no final decision had been made on the modalities or on the possible quantum of the levy.
The mechanism would be designed to encourage refiners to transition to the CF2 specification as early as possible and would, thus, incentivise refiners to pursue upgrades.
In April, energy groups BP and Shell confirmed a multibillion-rand programme to upgrade the Sapref refinery, in Durban, to meet requirements to reduce sulphur, benzene and aromatics levels in the petrol and diesel produced.
In early June, energy and chemicals group Sasol estimated that it would need to invest R11.7-billion at the Natref refinery and at Sasol Synfuels, in Secunda, to comply with the CF2 specifications. The Natref crude oil refinery, in the Free State, is a joint venture with Total.