Cleaner fuels hitting a refineries snag

LINGERING uncertainty about the introduction of cleaner fuels in South Africa is set to continue for longer as the petroleum industry and the government are yet to agree on the funding of upgrades to existing refineries in preparation for the switch to cleaner fuels.

Writing in the South African Petroleum Industry Association’s (Sapia’s) latest annual report, former Sapia chairperson Maurice Radebe said the uncertainty in South Africa’s regulatory environment hindered the high capital investments required for upgrading technologies such as refineries.

Encourage

“Sapia regularly engages with government and regulatory bodies to create clarity and finalisation of regulation for industry players. This will encourage investment, which can potentially increase the R15.6 billion (Gross Domestic Product) contribution by current Sapia members’ capital investment,” said Radebe.

The Department of Energy initially set the deadline for the introduction of the Clean Fuels 2 programme in July 2017. But the department has since delayed the target date indefinitely.

The industry contributes 8.1 percent to the Gross Domestic Product (GDP) and employs more than 700 000 people. Sapia represents the main petroleum and liquefied petroleum gas (LPG) companies in South Africa.

Radebe said there was no government decision regarding how the cost of upgrading South Africa’s existing refineries to produce new cleaner fuel specifications would be recovered.

There was no government decision regarding how the cost of upgrading would be recovered.

He said the delay in the implementation date for the implementation of clean fuels would allow for more discussions on the financing of refinery upgrades.

In her comments in the Sapia annual report, former Energy Minister Mmamoloko Kubayi said while the government’s focus was on a diversified energy mix, the demand for petroleum products will remain strong.

Energy Minister David Mahlobo last month told Parliament that South Africa’s Brics partners could help the country fund the refinery. “South Africa is at a tipping point regarding its refining capabilities,” said Mahlobo at the time.

The department’s integrated energy plan (IEP), which was unveiled in November last year, said there was currently inadequate supply in both the electricity and liquid fuel industries due to a lack of timely investments in new capacity.

Roadmap

The IEP provides a roadmap of South Africa’s future energy landscape and guides future energy infrastructure investments and policy development.

Meanwhile, Sapia said it has had discussions with National Treasury about the carbon offset regulations. The regulations, released in June last year, set out the procedure for the use of carbon offsets by taxpayers to reduce their carbon tax liability.

“Sapia’s view remains that to properly effect carbon policy the correct price signals also need to be directed at consumers for them to change behaviour and reduce carbon emissions.

“To this end, applying a tax to refinery emissions will not change consumer behaviour unless the tax can also be passed through to the end consumer. The current regulated price regime does not allow for this pass through and Sapia is continuing to engage with Treasury,” said Sapia.