20 February 2008
The Petroleum, Oil and Gas Corporation of South Africa’s (PetroSA’s) plans to build a crude refinery at the Coega industrial development zone outside Port Elizabeth have been given a boost, with the announcement on Monday that the state-owned oil company has been chosen as the preferred investor for earmarked land.
“Planning for the new refinery is well under way,” PetroSA CEO Sipho Mkhize said in a statement on Monday. “Design is well-advanced and we are in discussion with several local and international parties who have expressed interest in possible financial and operating partnerships.”
According to the company, a final decision on the investment, said to be worth about R39-billion, will be made around 2010, once the technical and commercial aspects have been clarified.
Mkhize said that while it was being built to secure future fuel supplies in the country, the decision to locate the refinery at Coega was not solely based on commercial criteria.
“This location also considers national interests such as alternate strategic access, port decongestion, wealth-generation equalisation and potential environmental impact,” Mkhize said. “PetroSA’s planning includes the provision of new oil terminals and upgrades at Cape Town, Mossel Bay, Port Elizabeth, Durban and Gauteng.”
Dubbed Project Mthombo, the proposed crude oil refinery is expected to produce about 250 000 barrels of fuel a day and is due to be operational by 2014.
“Project Mthombo will be one of the biggest post-2010 investments in South Africa,” Mkhize said at the time of the project’s announcement late last year. “It is estimated that the project will generate about 5 000 direct jobs during operations and 20 000 indirect jobs.”
The project, he said, would also significantly improve South Africa’s fuels import bill, serving to “redefine South Africa’s energy landscape.”
Based on the current growth rate of demand for fuel, Mkhize said that building a new crude oil refinery within the next five to seven years would be fully justified.
“The demand for automotive fuels in southern Africa already exceeds the local production capacity, and South Africa is becoming increasingly dependent on the import of refined automotive products.”
According to PetroSA, the Coega industrial development zone (IDZ) was chosen as the site for the proposed new refinery after a thorough and independent screening of five potential locations around South Africa.
The oil company said that Coega offered world-class infrastructure, was ideally located near growing demand centres in the Eastern and Western Cape and had sufficient land available for secondary industries to develop around the refinery.
PetroSA added that it believed that strong and complementary partnerships would be required to carry out a project of such a size and nature, both to mitigate any project related risk and to enhance the commercial and financial viability of the project.
“These partnerships will be established across the crude refining value chain, from the supply of crude oil, through the erection and operation of the refinery to the distribution and marketing of the automotive products,” Mkhize said.
“PetroSA is already in discussion with various potential partners to help bring Project Mthombo to fruition.”