Saudi-SA re­fin­ery on track, says Man­tashe

Business Day - - FRONT PAGE - Carol Pa­ton

The gov­ern­ment has reached an agree­ment with oil gi­ant Saudi Aramco for the con­struc­tion of a $10bn (about R147bn) re­fin­ery at Richards Bay, north of Dur­ban, min­eral re­sources & en­ergy minister Gwede Man­tashe said in Cape Town on Thurs­day.

The project has been in the off­ing since a visit by Pres­i­dent Cyril Ramaphosa to Saudi Ara­bia in July 2018, when a pledge for the in­vest­ment into SA was made.

The Cen­tral En­ergy Fund (CEF) is a joint de­vel­oper of the project, which is at the prefea­si­bil­ity stage. The pro­posed eq­uity stakes of the part­ners have not been dis­closed.

Last week, Ramaphosa ap­pointed for­mer en­ergy minister Jeff Radebe as his in­vest­ment en­voy for the oil and gas in­dus­try. Radebe has been in­volved in dis­cus­sions with the Saudis since Jan­uary.

Ad­dress­ing jour­nal­ists at Africa Oil week, Man­tashe said that Saudi Aramco “has com­mit­ted” to the project and there is agree­ment that the lo­ca­tion will be Richards Bay.

The gov­ern­ment had tried to per­suade the com­pany to lo­cate the re­fin­ery in Coega, its deep

water port and spe­cial eco­nomic zone which has strug­gled to at­tract in­vest­ment.

“One of the things we have re­solved is that we can’t tell the investor where to go. So we have in prin­ci­ple agreed on Richards Bay. What is left now is to see con­trac­tors on site,” Man­tashe said.

SA has seven crude oil re­finer­ies and im­ports about 200,000 bar­rels a day of the fin­ished prod­uct to meet de­mand.

Man­tashe said the gov­ern­ment is of the view that more re­fin­ing ca­pac­ity is needed and that it has a “re­spon­si­bil­ity” to en­sure that not all Africa’s oil is ex­ported without be­ing re­fined. The Saudi Aramco project is planned to be the big­gest re­fin­ery in the coun­try, pro­duc­ing 300,000 bar­rels a day.

Kholly Zono, the act­ing CEO of the CEF, said on Thurs­day: “This is not a Saudi Aramco de­vel­op­ment. It is be­ing de­vel­oped by both CEF and Saudi Aramco. We are cur­rently in the prefea­si­bil­ity stage.”

Zono said the plant was ex­pected to come on­line in 2027/2028.

Man­tashe said ex­plo­ration in the Ka­roo for shale gas is show­ing prom­ise.

“We have drilled down 1,403m and gas for­ma­tions are show­ing. That has en­cour­aged us to con­tinue to 3,500m. And at that level, we are con­vinced we will dis­cover shale gas.”

In his re­marks to re­porters, Man­tashe briefly touched on the fu­ture of the in­de­pen­dent power pro­duc­ers (IPPs) pro­gramme. The gov­ern­ment is en­gaged in rene­go­ti­at­ing the con­tracts with IPPs from the first three bid rounds, in which prices were much higher.

The IPP con­tracts re­quire that Eskom buy the power that IPPs pro­duce, with the con­tracts fully guar­an­teed by gov­ern­ment.

“There is hope that, when open, win­dow five prices will drop even fur­ther.

“The gov­ern­ment funded the risk of in­tro­duc­ing the tech­nol­ogy and it was the cor­rect de­ci­sion. But as the tech­nol­ogy is es­tab­lished in the econ­omy, it is im­por­tant for gov­ern­ment to say we are not go­ing to take the risk; pro­duc­ers take on your risk,” Man­tashe said.

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