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Just transition holds opportunities, but also risks for South Africa's liquid fuel value chain

8th June 2022

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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A just transition of the liquid fuels value chain to a low- and zero-carbon value chain presents opportunities for South Africa, but also holds risks in terms of timing and the impact of the transition on workers and employment.

These were some of the impacts discussed by researchers and industry practitioners and experts during a virtual event hosted by economic research institution Trade and Industrial Policy Strategies (TIPS) on June 7.

Reliable information on industry employment numbers is difficult to obtain, but 2019 numbers indicate that there were about 130 000 people involved in the marketing and retail portion of the value chain, 64 000 are directly and indirectly employed in the refining portion and about 30 000 in the logistics portion of the value chain, said independent researcher and industry organisation South African National Energy Association independent director David Wright.

He noted, however, that these numbers excluded employees of energy and chemicals company Sasol.

Direct jobs within the value chain include management and professionals, process operators, maintenance personnel and artisans in a broad range of professions, including fitters, riggers and electricians, besides others, as well as truckers involved in distribution and clerical personnel.

"In terms of vulnerability, people in management and professional jobs should be able to find employment in alternative organisations [within the changing liquid fuels value chain], as should truckers, maintenance artisans and clerical personnel within and outside the industry.

"Process operators are the most difficult to place, owing to their specific and focused skills, and they will either need to find new operator jobs, such as in emerging liquid fuels technologies, or cross-skill to fulfil other functions," Wright pointed out.

An important concern is that the industry will need to grow to absorb people made redundant by declining demand for fossil fuel liquid fuels, and the sector is not displaying much growth at the moment, he stressed.

Further, the industry has higher levels of skills compared with the average of the South African workforce, he added.

Meanwhile, the Cape Town Refinery has been offline since July 2020, and will restart in the third quarter of this year; energy multinational Engen's refinery in Durban has been shut since December 2020 and the company has announced that the refinery will be permanently shut down; and the Shell and BP South African Petroleum Refineries (Sapref) refinery, in Durban, permanently ceased operations in March.

Additionally, Sasol announced that it was not viable to upgrade the National Petroleum Refiners of South Africa (Natref) refinery, in Sasolburg, to produce cleaner fuels, and the future of the refinery would be announced during the third quarter of this year, Wright highlighted.

"In terms of transition timing, the transition has already started in the refining sector and has not been driven by the need to reduce carbon emissions, but has been driven by economics.

"In the logistics portion of the value chain, the timing will be different. As long as there is a need for liquid fuels, the logistics sector will continue to operate, primarily moving imported finished products. It is expected that, by 2035, demand for fossil fuel will begin to fall away," Wright noted.

Process operators are the most likely to not be able to get new work in a like-for-like position, unless new operations are established, such as bioprocessing or biorefining and green hydrogen operations, he added.

There is a mismatch currently, as none of these new operations have started yet and many people are already on notice in the refining sector. Further, new operations are expected to be significantly smaller in size than current refining operations, although they are expected to be more numerous, presenting potential to absorb more process operators.

Meanwhile, the retail portion of the liquid fuels industry, based on South African Petroleum Industry Association information, accounted for about 15% of the industry's total R163-billion contribution to gross domestic product, noted TIPS senior economist Nokwanda Maseko.

A shift to biofuels and natural gas over the short term will not necessarily mean every petrol station worker will be without a job, but the picture changes when taking into account electric vehicles (EVs).

"The long-term goal is to shift to EVs, which can be charged at homes and places of work without needing to go to a station to get fuel. However, the timelines for the shift to EVs remains unclear at this time," she said.

Further, many of the estimated 130 000 fuel station workers, which include fuel attendants serving 12-million vehicles and forecourt personnel, view work at fuel stations as transitory and they use the opportunity as a stepping stone to further education, business or work opportunities and do not tend to remain in the sector for a long time, Maseko noted.

These workers also contribute to the Unemployment Insurance Fund and some retirement funds, which provides some resources to mitigate the effects of the transition.

As the work is considered transitory by some employees, one option would be to phase out employment once South Africa has fixed timelines on removing internal combustion engine vehicles from the roads, while those who are permanent employees can be provided support in the form of reskilling or early retirement packages, if appropriate, she said.

Fuel station workers have experience in retail, which can serve as a basis for reskilling them to do other jobs.

"The most important thing we can say is that we cannot start planning around petrol station workers until we have greater certainty in terms of the transition to EVs, which would require a secure supply of clean energy and for the costs of EVs to decrease or for incentives to be offered to support uptake," she said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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