SA’s re­finer­ies must in­vest or go bust

CityPress - - Business - DEWALD VAN RENS­BURG dewald.vrens­burg@city­press.co.za

South Africa’s seven oil re­finer­ies have a small win­dow of op­por­tu­nity to ex­ploit the low global oil prices be­fore their mar­gins dis­ap­pear be­cause of the on­go­ing ex­pan­sion of big­ger and bet­ter fuel-mak­ing fa­cil­i­ties else­where.

Alan Gelder, re­fin­ing re­search head for con­sul­tancy Wood Macken­zie, says: “If there is no new in­vest­ment, prof­its will go down. “You need a regime where this is sup­ported.” He was speak­ing at a media break­fast or­gan­ised this week by the SA Petroleum In­dus­try As­so­ci­a­tion (Sapia), which rep­re­sents South Africa’s oil-re­fin­ing and fuel-whole­sale sec­tor.

The good news is that South Africa’s re­finer­ies are mak­ing money and sit in the mid­dle of the prof­itabil­ity rank­ings of re­finer­ies in Africa and Europe. The bad news is that this is not the great­est peer group, be­cause Europe is set to close sev­eral re­finer­ies that can­not com­pete with new­gen­er­a­tion fa­cil­i­ties in the US and Asia.

Wood Macken­zie pre­dicts that South Africa’s net im­ports of diesel will con­tinue to grow through to 2025. Con­sump­tion was about 13.1 bil­lion litres last year, while the re­finer­ies pro­duced 9.1 bil­lion litres. Eskom alone is burn­ing about 10% of all the diesel used in South Africa.

Chief di­rec­tor of energy plan­ning at the depart­ment of energy Tshilidzi Ra­muedzisi, who at­tended the Sapia event, said there would fi­nally be a de­ci­sion on Clean Fu­els 2 (CF2) in Novem­ber.

The point of con­tention is how the re­finer­ies will re­cover the costs of up­grad­ing their plants. They ar­gue for a full cost re­cov­ery through the fuel price on the ba­sis that the in­vest­ment gives them “no re­turn” and is ba­si­cally a public ser­vice.

Chanel Burke, a Sapia spokesper­son, clar­i­fied that this “re­turn­less” cap­i­tal ex­pen­di­ture would be un­re­lated to the in­vest­ments to main­tain prof­itabil­ity ad­vised by Gelder.

As part of the talks, Sapia has to “re­mo­ti­vate the ra­tio­nale” for CF2, which in­cludes spin-off ben­e­fits for the mo­tor in­dus­try and the en­vi­ron­ment, ac­cord­ing to its an­nual re­port, also re­leased at the event.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.