With the upcoming closure of refineries, South Africa will probably be extra depending on gas imports: SAPIA
South Africa will become even more dependent on imports for its fuel needs as the country’s refining sector faces an uncertain future, said Avhapfani Tshifularo, executive director of the South African Petroleum Industry Association (SAPIA) on Jan. 27.
“Imports are becoming more attractive,” said Tshifularo in an interview with S&P Global Platts. “[Refiners] can divert capital … instead of investing billions in modernizing the refinery. [They] can put a quarter of it into the construction of an import terminal. “
The lack of government funds and the lack of demand in South Africa to justify substantial investments are putting increasing pressure on refineries and some shareholders have been talking about pulling out of existing projects.
Tshifularo said all six of the country’s refineries are “currently under review” and some of them are facing some very difficult decisions.
The likely scenario is to either “convert a refinery to import or dispose of it [of] the refinery as a whole ”instead of an expensive upgrade program.
South Africa currently relies on imports for 40% of its needs, as two refineries have ceased operations. That number rose sharply last year when two of the main refineries – the Engen refinery at 125,000 b / d in Durban and Astron Energy’s 110,000 b / d plant in Cape Town – were shut down after a fire.
“In the long run, we could reach a balance of 60:40, with 60% responsible for imports,” he added.
The outages in 2020 mean that the country is already in “import mode”. Along with environmental and regulatory pressures, imports are becoming increasingly attractive to meet the demand for higher quality fuels compared to self-production, Tshifularo said.
According to estimates by the energy secret service Kpler, South African imports of refined products rose to 321,000 b / d in January. According to Platts estimates, this is the highest value in almost a decade.
In 2020 South Africa imported 200,000 b / d of oil products, compared to 174,000 b / d and 165,000 b / d in 2019 and 2018, respectively, according to Kpler data.
Almost half of the country’s imports were diesel, which the country relies heavily on for its electricity generation. Gasoline and gasoline also make up a significant part of imports. The South African mining industry, which accounts for most of the country’s export revenue, is a major consumer of gas oil and diesel.
India, the United Arab Emirates, Oman, Saudi Arabia, Singapore, the Netherlands, the United States and Italy were some of the major product suppliers in South Africa.
The dependence on imports is also due to the fact that most of South Africa’s refineries are in dire need of modernization.
The refining sector has been underinvested and its capacity consists mainly of non-complex refineries that require costly upgrades as South Africa pushes to use refined products with lower sulfur content.
However, Tshifularo said South African refiners are unlikely to see any improvements unless there is a financial appetite for it.
“The question of upgrades is in the air. I can’t see anyone else worth investing $ 1 billion in … a refinery kit, “he said. “It’s just too much money that you have to invest to get no return at all, especially when shareholders are so burdened.”
The coronavirus pandemic and the demand for a faster and smoother energy transition have had a profound impact on the global refining sector, especially in countries with old refineries like Europe and South Africa.
It could be 75% cheaper to convert a refinery into an import facility than modernizing it, Tshifularo said.
“Without financial support, they won’t invest in an upgrade. The world has now moved on, ”he said. “If there is an investment, it will be very small and only made to stay in the game.”
South Africa, a net importer of fuels for transportation, has increased its consumption of diesel and gasoline, with a large portion of the country’s total refining capacity being 700,000 b / d offline due to recent refining problems.
This is because the country’s oil demand remains under pressure due to strict lockdowns caused by the spread of a mutant strain of the coronavirus.
Tshifularo said SAPIA hopes the country’s efforts to use low-sulfur or clean fuels will bear fruit.
The country’s oil sector is currently in consultation with the automotive industry for more details on the technology needed to change fuel specifications.
There has been talk of improving South African specifications for the past 10 years, but so far these have become too small and South African refineries are unlikely to be able to supply the higher specification fuel.
The 125,000 b / d Engen refinery in Durban – the second largest in the country – remains closed after a fire and explosion on December 4th. Meanwhile, Astron Energy’s 110,000 b / d refinery in Cape Town has been offline since July when it suffered an explosion.
Of the two, Astron seems more likely to be returning, he said.
“Nothing formal has been given as to whether these refineries are expected to be back on stream… but it appears that Astron is definitely coming back based on the discussions I’ve had with them. Narrow is in the air. “
There have been media reports that the Engen site is becoming an import terminal.
Astron Energy and Engen spokespersons were unavailable for comment.