Pump and circumstances
Who will pay to upgrade SA’s refineries?
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.