Fate of Coega oil refinery still in balance
MORE than a year after PetroSA signed a two-year framework agreement with Sinopec of China to advance Project Mthombo‚ the planned 300000-barrel-a-day refinery at Coega‚ no decision seems to have been made to start construction.
Transnet Pipelines strategy general manager Lennie Moodley told the South African Petroleum Industry Association (Sapia) conference last week that Transnet Pipelines' strategy on future investment would be influenced by Project Mthombo‚ but that decisions on the refinery had not yet been made.
"There is no certainty on what direction the discussions will take‚" Moodley said.
The Coega Development Corporation referred questions on the progress of Mthombo to PetroSA‚ which did not respond. PetroSA's plans to build a new refinery have elicited some criticism because refineries are costly to build and the margin on refining is relatively small.
Both Dangote Industries, of Nigeria, and Angola's state-owned Sonangol have advanced plans to build big refineries‚ but some countries have found it cheaper to import refined oil.
Moodley said Gauteng was the main hub for fuel demand in South Africa. Bringing fuel from Coega to Gauteng would have to be either by way of a 1200km pipeline‚ which would be a significant investment‚ or by shipping the refined product from Coega to Durban. From there it would be transferred to Gauteng using Transnet's multi-product pipeline.
Moodley said if it was decided to build a pipeline from Coega to Gauteng‚ Transnet would not go ahead with future expansion on the Johannesburg-Durban pipeline. Late last year‚ Kenya's only refinery‚ which was 50% owned by Essar Energy, of India, and 50% by the government‚ closed down. It was losing about $200000 (R2.1-million) a day‚ fuel distributors complained about the quality of its products‚ and upgrading it would have been too costly.
Pierre Reteno Ndiaye‚ president of the African Refiners' Association‚ told the Sapia conference that a study commissioned by his association from Wood Mackenzie concluded that refineries in developed countries brought far greater benefits than those in less-developed countries.
The benefits included the creation of direct jobs‚ indirect jobs in downstream industries‚ and spin-off employment as a result of spending wages. Total job creation could be up to 10000 in some countries.
Other benefits were that refineries offered security of supply and were better for the environment‚ as they reduced emissions from tankers importing oil‚ he said. Refineries could develop downstream industries and facilitate tax collection by providing a well-controlled tax point.
Ndiaye said a weak refinery in a lesser-developed country could cost up to $50-million (R520-million) a year. A strong refinery in a developed country could contribute $300-million (R3.1-billion) value added a year.
Project Mthombo has been on the table for several years. In 2010‚ parliament was told the feasibility study had been completed.
In March 2013‚ Sinopec and PetroSA signed the two-year framework agreement. PetroSA said on its website it was developing the Mthombo project with Sinopec as anchor partner and the Industrial Development Corporation as funding partner. - Charlotte Mathews
