The most significant challenges that the South African petroleum industry will face this year include security of fuel supply, changes to the transformation framework and cost-recovery models for cleaner fuels, newly elected 2013 chairperson of the South African Petroleum Industry Association (Sapia) Christian des Closières said at a media roundtable in February.

“The energy industry has a responsibility to the public to weigh in and work with the communities on which we impact. This year, I look forward to engaging with the industry and its various stakeholders so that we may achieve the crucial goals that were set last year,” he said.

Des Closières noted that South Africa had limited oil reserves and the bulk of its crude oil requirements needed to produce petrol, diesel, residual fuel, oil, paraffin, jet fuel, aviation petrol, liquefied petroleum gas and refinery gas, which were met by imports from the Middle East and Africa.

Crude oil refining, coal-to-liquids, gas-to-liquids and natural gas-to-liquids fuels produce these petroleum products and, as a result, the country’s liquid-fuels sector presents several opportunities for investment, says national oil company PetroSA.

National demand for refined fuels already exceeds South Africa’s refining capacity and demand is set to increase. Diesel consumption is forecast to grow at 4.5% a year and petrol consumption at 1% a year between 2012 and 2020, states PetroSA, which also estimates that, by 2020, South Africa will have to import 180 000 bbl/d of petrol and diesel if there is no significant investment in local refining capacity.

In 2010, PetroSA concluded a feasibility study on a 400 000 bl/d refinery at the Coega Industrial Development Zone outside Port Elizabeth, in the Eastern Cape. The proposed Mthombo oil refinery, which should be completed by 2015, will save on energy costs.

PetroSA adds that importing refined fuel will have a negative impact on the country’s foreign exchange reserves and it makes national supply vulnerable to external factors.

To deal with this challenge, the South African government has introduced the Energy Security Master Plan, which calls on PetroSA to provide strategic leadership to achieve security of supply.

In September last year, Sapia told Engineering News that investment was necessary not only in the expansion and upgrade of the country’s existing refineries, but also in the construction of a new refinery, as the expansion potential for the existing refineries was limited.

By increasing fuel production capacity, local refineries will also increase their output of petroleum by-products, such as bitumen, which is used in road construction and is often in short supply in South Africa.

Also, State-owned freight logistics group Transnet’s R23.4-billion new multiproduct pipeline to transport petroleum over 550 km from Durban to Johannesburg is under construction and is scheduled to be fully operational by December 2013.

Clean Fuels
Des Closières said the petroleum industry faced several significant challenges pertaining to the environmental impact; therefore, Sapia continued to support initiatives aimed at reducing carbon emissions.

Reducing the level of harmful emissions from motor vehicles, which led to an improvement in urban air quality and reduced the negative impact on people, was noted as another focus area for Sapia, which hoped to continue its carbon emissions initiative, launched in 2011.

“Investments of up to R40-billion are needed to upgrade existing refineries and change South Africa’s fuel specifications to realise cleaner exhaust emissions. The fuel we currently produce in the country complies with exhaust emissions standard Euro 2, while European countries are already at the highest global standard – the Euro 5 level,” he stated.

Des Closières added that the Department of Energy’s (DoE’s) clean fuels specifications aimed to reduce the aromatic and benzene content of petrol and this would be in line with Euro 5 level emissions.

The DoE aims to have refineries compliant with these standards by 2017, which also includes the reduction of sulphur from 500 parts per million (ppm) to 10 ppm.

“Sapia continues to seek the finalisation of clean fuels specifications from the DoE and promote an integrated approach to properly manage the impact of vehicle emissions on urban air quality.

“Transformation is one of the petroleum industry’s top priorities and there are legislation, a charter and codes of good practice in place to ensure that it takes place. The Liquid Fuels Charter of 2000 was created to transform the petroleum and liquid fuels industry to achieve the policy objectives of the 1998 Energy White Paper,” Des Closières said.

He added that the White Paper was unequivocal about the ownership and control by historically disadvantaged South Africans of a quarter of all subsectors across the value chain. The 1998 Energy White Paper, the Liquid Fuels Charter, the Black Economic Empowerment Codes of Good Practice and the Broad-Based Black Economic-Empowerment (BBBEE) Act of 2003 defined the industry’s transformation roadmap.

Des Closières also mentioned that Sapia would continue to aim to fulfil goals it agreed to last year by supporting government initiatives for the betterment of the petroleum industry. “The Liquid Fuels Charter and continuing to comply with BBBEE policies until new information emerges, and also awaiting communication from Energy Minister Dipuo Peters on the way forward with regard to the transformation dispensation, will be our key focus this year.”

As a way to support the DoE’s transformation framework, Sapia initiated the Leadership in Oil & Energy (LOE) Certificate Programme in 2006 as a human-resource development initiative, from which 348 employees have graduated.

Des Closières stated that with government’s aim to transform and upgrade to Clean Fuels 2, more expertise was needed and skills development was mandatory for the petroleum sector.

“For this reason, in 2013, the name of the LOE programme will change to the Advanced Certificate for Management in Oil and Gas, which will aim to develop a talent pipeline to support transformation,” he said, add- ing that Sapia planned to include case studies in each module of the programme and to initiate practical workplace experience with Sapia members for learners. Professional lecturers and industry experts will deliver lectures in all modules.

Further, Sapia’s partnership with the Chemical Industries Education & Training Authority and the National Partnership for Educational Access would continue to consider strategic cooperation on human-resource development issues, added Des Closières, who also noted that

the association would continue to establish a Sapia gender forum, which was a rotational mentorship programme for women.

“The forum will comprise three committees and work towards achieving 30% representation for women across all Sapia committees in the next three years”, said Des Closières.