Glencore is in negotiations with the South African government about a pledge to invest R6-billion in the Cape Town refinery, as the company is set to miss the deadline following an explosion that shut the plant for several years.
The commodities-trading giant agreed when it bought the plant to make the investment in the facility within five years, a period that ends near the end of this month. South Africa has indicated discussions over the matter are ongoing, while Glencore said it remains committed to the investment.
The Department of Trade, Industry and Competition “can confirm that it is in negotiations with Glencore and the two are on course to reach an agreement,” it said by email, without specifying a timeline. “The department is confident that once an agreement is reached and signed, the committed funds will be spent accordingly.”
South Africa’s refining system has been plagued by underinvestment, with the nation losing about half of its oil-processing capacity in recent years. Plants have closed as cleaner fuel specifications loom, though fires and floods have also been a factor.
Glencore and local partner Astron Energy “remain committed to spending R6-billion to upgrade the refinery and thereby supporting an ongoing refining industry in South Africa,” the trader said in response to questions.
It’s not clear how much Glencore — which posted record profits last year — has invested so far. Investments have been made in the facility, and production levels are in line with commitments, the company said, adding that it maintains communication with the government over additional progress.
The company acquired the 100 000 bl/d refinery from Chevron Corporation five years ago, usurping a bid from China Petroleum & Chemical Corporation. It owns the asset through a majority holding in Astron.
The plant restarted earlier this year for the first time since it was shut in 2020, after a fatal explosion during annual maintenance. It’s the only local South African facility producing very low sulfur fuel oil that meets strict international shipping fuel standards, according to Glencore.
The merger agreement called for the investment of R6-billion “over and above Astron’s current investment plans” within a period of five years from September 27, 2018, according to an online copy. The terms also included increasing the refinery’s production from 75% to 90% of nameplate capacity.
Chevron in 2015 estimated it would need to spend as much as $1-billion on upgrading the refinery, built in 1966, to meet such regulations.