South Africa's national oil company PetroSA is studying various options for transitioning its gas-to-liquids (GTL) refinery, in the Western Cape, from the production of transport fuels to higher-value petrochemicals as its gas feedstock costs continue to rise.

Operations VP Dr Thabo Kgogo says while the GTL refinery remains part of a vertically integrated operation, which includes offshore gas production, the cost structure of the business is rising as the group moves to exploit more technically challenging offshore fields.

Acting planning and operations manager Mark Hobbs says the opening up of the FO offshore field from October will guarantee the refinery much needed gas supply. However, Project Ikhwezi, PetroSA’s code name for the development, will exploit reserves that are more challenging and expensive to liberate.

It is also working on a liquefied natural gas (LNG) import solution, which will bolster security of supply over the longer term, but this will also be relatively expensive. PetroSA plans to make a final investment decision on a $375-million to $510-million liquefied LNG import facility in the fourth quarter of 2014, from which first gas could flow in early 2018.

The project is said to be necessary to guarantee feedstock for the refinery beyond 2020. In fact, gas shortages have been a chronic problem for the GTL plant, which was developed in the late 1980s as a strategic initiative by the apartheid government to shore up supplies of liquid fuels.

Current shortages mean that the refinery is operating at only about 50% of its 42 000 bl/d nameplate capacity, which should rise to over 60% once Project Ikhwezi comes on-stream. Kgogo indicates that a return to full production would be predicated on the LNG initiative.

To deal with these anticipated cost increases, the State-owned group is assessing diversification of its production to include higher volumes of speciality chemicals to increase its future operating margins, Kgogo explains.

However, such a shift is partly linked to the development of a new 300 000 bl/d crude refinery at Coega, in the Eastern Cape, which would free the GTL refinery in Mossel Bay from its national fuel security-of-supply obligations.

The initiative, dubbed Project Mthombo, could involve an investment of between $9-billion and $11-billion.

A full feasibility study into the project is about to begin and will be conducted jointly with PetroSA, Chinese petroleum and petrochemicals group, Sinopec, and the Industrial Development Corporation.

The study is expected to be completed by the end of 2014.