South Africa will grow even more dependent on fuel imports as the country’s aging refinery sector faces an uncertain future, the South African Petroleum Industry Association (SAPIA) has warned.
In an interview with S&P Global Platts, SAPIA executive director Avhapfani Tshifularo said all six of the country’s refineries are currently “under review” and some of them “will have to make some very difficult decisions.”
SA in ‘import mode’
The likely scenario will be to either “to convert a refinery into import or dispose (of) the refinery altogether” instead of an expensive upgrade program, he said.
It could be 75% cheaper to convert a refinery into an import facility than to upgrade it, Tshifularo added.
Tshifularo said that Eskom’s load shedding in 2020 means the country is already in “import mode” and along with environmental and regulatory pressures, imports are becoming increasingly attractive to meet demand for higher quality fuels, compared to home production.
“Without any financial support they are not going to invest in an upgrade. The world has moved on now. If there is any investment, it will be very minimal, and will be done just to stay in the game.”
Almost half of SA’s oil refining capacity shut until 2022
South African plants owned by Glencore Plc and Petroliam Nasional Bhd that make up 43% of the nation’s oil-refining capacity are expected to stay shut until at least 2022, according to energy consultant Citac, reported BizTech.
The closures will force South Africa to rely heavily on fuel imports, Bloomberg reports.
Tough decisions ahead
All of South Africa’s oil refineries – with a total capacity of more than 500,000 barrels a day – have had accidents or are under review, with the industry already hit hard by the Covid pandemic.
A pending national clean-fuels policy is also likely to add to the cost burden to cover upgrades, reports said.
Engen said they are considering options for its 120,000 barrels-a-day plant after a local news website reported that it’s expected to shut in 2023 and may be converted into a fuel-storage terminal.
If the plan is to close in two years, “it would not make economic sense to invest into bringing it back up,” said Elitsa Georgieva, an analyst at Citac.