Pump and cir­cum­stances

Who will pay to up­grade SA’s re­finer­ies?

Finweek English Edition - - INSIGHT - SVET­LANA DONEVA svet­lanad@fin­media24.com

THE RE­CENT AN­NOUNCE­MENT by the Min­er­als & En­ergy depart­ment that it would up­grade the stan­dards and spec­i­fi­ca­tions of South Africa’s fu­els by 2017 is un­de­ni­ably good news. SA ve­hi­cles run on a fuel stan­dard equiv­a­lent to the in­ter­na­tional Euro II while ma­jor­ity of the de­vel­oped world’s cars are burn­ing Euro V stan­dard fu­els. The only ques­tion is: who should pay for the up­grade of SA’s re­finer­ies? En­ergy Min­is­ter Dipuo Peters’s ini­tial re­port, is­sued last week, doesn’t out­line the cost re­cov­ery process of the ex­er­cise.

The South African Pe­tro­leum In­dus­try As­so­ci­a­tion (Sapia) – which rep­re­sents BP, Chevron, En­gen, Shell, To­tal, Sa­sol and PetroSA – es­ti­mates the cost at around R30bn. “You can’t ex­pect the re­finer­ies to pay for it all. This is a zero re­turn in­vest­ment,” says Sapia di­rec­tor Avhap­fani Tshi­fu­laro. Sapia ob­vi­ously sup­ports the need for mon­e­tary as­sis­tance and Tshi­fu­laro says the ben­e­fi­cia­ries of cleaner fu­els should be the ones who pay.

The Euro V fuel stan­dard will mean lower car­bon emis­sions, which will af­fect the health of all South Africans, par­tic­u­larly those who live in large metropoli­tan ar­eas. An­other po­ten­tial ben­e­fi­ciary is SA’s ve­hi­cle and com­po­nent man­u­fac­tur­ing in­dus­tries, which have been plac­ing pres­sure on SA’s re­finer­ies to up­grade stan­dards for some time due to the tech­no­log­i­cal ad­vance­ments in en­gines us­ing cleaner fu­els.

“Logic dic­tates the cost of the fuel up­grade should be borne by the Gov­ern­ment and road users,” says Peter Noke, na­tional di­rec­tor at the South African Pe­tro­leum Re­tail­ers’ As­so­ci­a­tion. “The only prob­lem is road users are al­ready taxed to death,” says Noke.

There are cheaper ways to lift SA’s fuel stan­dards, Tshi­fu­laro says. The most ob­vi­ous so­lu­tion would be to up­grade SA’s lo­gis­tics and sim­ply im­port cleaner fu­els. It’s cur­rently un­clear whether Gov­ern­ment is con­sid­er­ing that op­tion.

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