South Africa’s refinery sector faces dim prospects

South Africa’s energy minister, Jeff Radebe, is expected to announce a development plan for Project Mthombo, a new 300,000 barrels a day (BOPD) refinery, which would inject new life into SA’s refinery sector.

The project may be controversial because arguments for a new refinery are not conclusive, and SA has a poor record in bringing mega projects on stream on time and on budget.

SA’s six privately-owned refineries have been largely in limbo for the last few years. Most are 50 years old or more and in need of substantial investment to enable them to meet the latest standards for petrol and diesel for new-model vehicles, or most will be closed in the next few years.

In 2012 SA introduced new regulations, called Clean Fuels II, to enforce the Euro V standard for fuels by mid-2017. But the effective date has been postponed while government and oil companies are at odds over how the refineries will be able to recover the costs (in a regulated fuel price environment) for making the necessary upgrades. In the interim, the refined product needed for the latest model vehicles is being imported.

Source: Africa Oil + Gas Report

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