R1.7bn oil investment for W Cape

23 March 2006

German-based industrial giant MAN Ferrostaal has unveiled a major investment in the Western Cape, announcing plans to establish two offshore oil and gas fabrication and refurbishment facilities, together worth R1.7-billion, at the ports of Saldanha Bay and Cape Town.

Making the announcement at the Oil Africa 2006 exhibition and conference in Cape Town on Wednesday, MAN Ferrostaal chairman Matthias Mitscherlich said the direct investment in the two projects – an offshore fabrication yard at Saldanha and a service and refurbishing hub in Cape Town – would amount to R220-million.

According to Business Day, the balance of R1.5-billion would be in “indirect” investment involving relocating operational equipment from other parts of the country and putting it to full use at the new locations.

The projects are expected to create thousands of jobs locally.

‘The cream of South African industry’
The investment, to be made with local partner Atlantis Marine Projects and other financial partners, “will be entirely committed to the development of world-class oil and gas-related portside infrastructure in Saldanha Bay and Cape Town,” Mitscherlich said.

MAN Ferrostaal’s local technical partners in the project – described by Mitscherlich as “the cream of South African industry” – include Grinaker LTA, DCD Dorbyl Heavy Engineering, DCD Dorbyl Marine, SA Five Engineering and Globe Engineering Works.

Service hub for the oil industry
Wednesday’s announcement marks a breakthrough after years of work by the government to position the Western Cape as a service hub for west Africa’s booming oil industry.

“The establishment of these world-class facilities will, we believe, open a new chapter in the African landscape, whereby the excellent industrial infrastructure and technological capacity of South Africa can be channeled through to support the growing west and southern African offshore oil and gas fleets,” Mitscherlich said.

The developments, he said, would have “a profound effect on the continental and international status” of the ports of Cape Town and Saldanha.

With international demand for oil and gas growing and the political risks of investment in the Middle East seen as more acute, Africa has emerged as a major future source for these precious commodities.

The United States, which consumes 25% of the world’s oil, is increasingly looking towards Africa to feed what US President Bush has called its “addiction”.

US Senator Rodney Ellis, in his keynote address at Oil Africa 2006, said the US estimates that it could be importing as much as 25% of its oil from Africa by 2015, compared with 16% at present.

New capacity on African soil
South Africa, while not a major oil producer, is seen as capable of contributing to the expansion of African offshore fields through the establishment of world-class, internationally certified facilities in the Western Cape.

Ellis said MAN Ferrostaal’s investment showed how significant Africa and South Africa were becoming on the international stage, and was a positive indication of what was yet to come.

Atlantis Marine Projects’ Brian Blackbeard told Business Day that South Africa currently had only 6% of the potential market in the offshore oil and gas industry, due to lack of infrastructure and coordination of logistics.

With the new facilities, Blackbeard said, local companies would be able to ramp up capacity and increase their stake in this sector.

“The advantage of the two projects is that they offer new capacity on African soil, geographically the closest facility [for west African oil fields] compared with Asian, European, Mexican and European facilities.”

Construction timetable
Construction on the Saldanha Bay and Cape Town facilities is to be fast-tracked, and both are expected to be operational within 10 months, according to Mitscherlich.

Businesses servicing multinational players in the oil industry will “already be in a position to engage with the market and respond to tenders to load the sites for work early next year”, Mitscherlich said.

Final assembly capability will be ready by the second quarter of 2007.

SouthAfrica.info reporter and BuaNews