South Africa's Energy Minister Dipuo Peters reiterated her support on Tuesday for the development of a greenfield crude-oil refinery in South Africa's Eastern Cape province, indicating that the project would be necessary to ensure South Africa's access to cleaner fuels.
The project, dubbed Mthombo, is being studied by South Africa's National oil company, PetroSA, which believes that a 400 000 bl/d refinery will help South Africa close any liquid-fuels security of supply gaps.
However, established oil companies, most notably BP Africa, have called on government to assess all the supply options before pulling the trigger on what would be an $11-billion investment at a site, Coega, that is not currently linked by pipeline to the fuel-consuming hinterland of Gauteng province.
But Peters argued that the project would have an array of strategic benefits; from developing modern refining capacity in Africa as the oil majors signalled their intentions to withdraw from downstream activities in Africa, through to placing the destiny of South Africa's fuel quality in its own hands.
The board of PetroSA, which is a subsidiary of the Central Energy Fund, had made representations to government in a bid to persuade it to help it fund the front-end engineering design (FEED) for the refinery. However, the National Treasury and Cabinet had yet to make a decision on such funding.
Engineering News Online understands that PetroSA is seeking an injection of R2,4-billion to finance the FEED, having already spent some R250-million on the prefeasibility studies. However, PetroSA had also indicated that it would prefer to be a minority investor in the project, which was too large for its balance sheet alone.
Peters indicated that she was strongly in favour of the investment, noting that President Jacob Zuma had also been marketing the project to crude-oil producing countries in Africa and South America.
However, there are many critics of the development, which some argue would be stranded from key markets and which others regard as unnecessary, owing to the glut of refining capacity currently in place globally.
But Peters argued that the project had reached a stage where a "go-ahead" was needed so that an investment decision could be made by 2012.
She noted that the site had been selected and that if government "arrived at the stage", in the near future, of showing support for the FEED study, it would be a signal of "in principle" support for the investment.